Retail: Slow start to spring projected for retailers; Online spending saw growth

By Anne D'Innocenzio AP Retail Writer NEW YORK (AP) -- A late Easter, lingering cold weather and rising gas prices are squeezing discretionary spending this spring, according to data released Wednesday. Figures from MasterCard Advisors' SpendingPulse show sales growth slowed in some categories last month. But consumers spent more on clothing -- and most other items from electronics to luxury goods -- than they did in March 2010. SpendingPulse tracks spending across all payments including cash. Growth in online sales, still less than 10 percent of all retail sales, accelerated last month as shoppers tried to save on gas, according to Michael McNamara, vice president of research and analysis for SpendingPulse. Online spending in all categories rose 16.1 percent, compared with lower rates in January and February and a 15.9 percent increase in March 2010. "March wasn't too bad; the momentum is continuing," McNamara said. "But gas prices could have a bigger effect (on spending) if they continue to rise." Separately, selected major retailers are to report Thursday on sales at their stores open at least a year. Economists expect them to report a 0.9 percent drop for March, the first decline since August 2009. An important factor in the expected drop is that Easter falls on April 24 this year, so sales won't get a boost from holiday-related spending until April. Last year, Easter fell on April 4 so shoppers bought clothing and other goods in March. Analysts say combining March and April figures gives the best read on consumer spending. Ken Perkins, president of the RetailMetrics LLC research firm, agreed that gas prices are "a cloud looming" that could stall the increased consumer spending that stores saw in January and February. He said he expects a 0.5 percent sales drop for March, compared with an 8.7 percent increase in March 2010. For March and April combined, Perkins expects about a 3.5 percent increase, in line with the rate spending has been growing since January. Prices for food and other goods also are on the rise. Food prices are expected to rise 3 to 4 percent this year, with the steepest hikes in dairy, meat and coffee. Clothing sellers are raising prices to offset soaring costs for labor in China and for raw materials like cotton. Consumers surveyed in March for the Conference Board's Consumer Confidence Index voiced concerns about inflation and stagnant incomes. The index fell sharply from a three-year high in February, reversing five straight months of improvement. On the plus side, job growth gained momentum in March, with companies adding workers at the fastest two-month pace since before the recession began. But low- and middle-income workers' wages may not benefit, and they may be increasingly hard-pressed to keep up with rising costs for basic items. "The job headlines are great, but does that mean they're going to Kohl's and being able to spend?" Perkins said. Published: Thu, Apr 7, 2011