WASHINGTON — Retail sales fell in April for a second straight month, dashing hopes that consumer spending was starting to revive and would help end the recession.
Economists said families who are worried about layoffs and unpaid job furloughs are saving more and spending less, delaying the start of a sustained recovery.
The disappointing report helped send stocks down on Wall Street.
Retail sales fell 0.4 percent last month, worse than the flat performance many economists had expected, the Commerce Department reported Wednesday.
Retail sales had posted gains in January and February after falling for six straight months. The gains had raised hopes that the crucial consumer sector of the economy might be stabilizing. But the setbacks in March and April retail sales cast doubts on that prospect.
"People are obviously still very nervous and not spending," said David Wyss, chief economist at Standard & Poor's. "The economy is still in a recession, and I don't think we will hit bottom until late summer or early fall."
Meanwhile, more than 342,000 households received at least one foreclosure-related notice in April, up 32 percent from the same month last year, RealtyTrac Inc. said Wednesday. April was the second straight month with more than 300,000 households receiving a foreclosure filing.
Analysts said the economy should benefit in coming months from the tax relief included in the $787 billion stimulus plan Congress passed in February. But the extra $17 a week that the average family will receive won't translate into a major boost in spending.
Such modest relief is hardly enough to negate the effects of layoffs and employee furloughs, shrunken retirement accounts and home equity and consumers struggling to boost savings because of fears about the future.
Mary Goodman has stopped most of her extraneous spending — like meals out. She reined in her spending habits after March 1, when she was laid off from her job as an office manager at an online job posting company in Milwaukee.
Now, the 60-year-old Goodman eats out just once a week with a former co-worker, a trip that included soup at an indoor market on Wednesday afternoon.
"I'm not doing any clothes shopping," she said. "I'm not tempting myself by going into the mall."
Anecdotal evidence had signaled some improvement in sales in recent weeks. But "to offset the plunge in wealth, the household saving rate still needs to double from the current rate of 4 percent," Paul Dales, U.S. economist with Capital Economics in Toronto, wrote in a research note.
"With falling employment hitting incomes, this can only be achieved by a further retrenchment in spending."
The savings rate, which was hovering around zero a year ago, has climbed to just above 4 percent. Many economists think it will hit 6 percent or more this year as workers anxious about layoffs and depleted investments put away their credit cards. The jobless rate rose to a 25-year high of 8.9 percent in April, with a net total of 539,000 jobs lost during the month.
The fall in retail sales in April came even though car sales posted a 0.2 percent increase. Excluding autos, the drop in retail sales would have been 0.5 percent — much worse than the 0.2 percent gain economists had expected.
Sales other than autos showed widespread weakness last month. Demand at department stores and general merchandise stores fell 0.1 percent. Sales at specialty clothing stores dropped 0.5 percent.
Sales also fell in April at furniture stores, electronic and appliance stores, food and beverage stores and gasoline stations, the Commerce Department said.
The sales drop at department stores and specialty clothing stores came as a surprise because the nation's big chain stores had reported better-than-expected results for April. Same-store sales rose 0.7 percent last month compared with April 2008. It was the first overall increase in six months, according to the tally by Goldman Sachs and the International Council of Shopping Centers.
The two reports aren't comparable, analysts noted. The government figures, for example, cover more stores and are adjusted for seasonal variations.
Analysts said one reason the consensus forecast may have been too optimistic is that with many stores closing, it's been difficult to estimate industry figures accurately.
Department store operator Macy's Inc. on Wednesday reported a wider loss for the first quarter, due partly to restructuring charges. Still, the company expects to see an improvement in sales from its localization efforts beginning in the fourth quarter of 2009, and in the spring of 2010.
Liz Claiborne Inc. also reported a first-quarter loss that was worse than Wall Street expected. The apparel maker said its quarterly loss swelled on restructuring charges and a drop in same-store sales stemming from lower consumer spending and an extra week of sales in the year-ago period.
Consumer spending grew 2.2 percent in the first quarter of the year, after posting back-to-back quarterly declines in the last half of 2008.
Economists think the overall economy, as measured by the gross domestic product, will show a decline of around 3 percent in the current quarter. That would compare with steep declines of more than 6 percent each in prior two quarters, the worst six-month performance in a half- century.
"The weak start to second quarter consumer spending is a potent reminder that the recession is not over, despite signs of green shoots," said Stuart Hoffman, chief economist at PNC Financial.
Goodman needs no such reminder. Despite her reduced spending, she said her son likely will have to move home from college because she can't pay his rent.