According to the monthly Commerce Department report, retail sales, which account for about one-third of US GDP, fell slightly in March, following an upwardly-revised 0.3% gain in February. Total sales in March decreased 1.1%, much worse than the 0.3% increase forecasted by economists. For the quarter, January’s 1.9% gain was the first monthly increase since June 2008 and the largest since November 2007. Add that with February’s positive reading and March’s disappointing results, and you still have a 1st quarter that is greatly exceeding expectations. What is that going to do for this quarter’s GDP number?!? In the last year though, total sales are still down a staggering 9.4%.

Although today’s report may seem bleak, the data reported by the government is not adjusted for any price changes. This means that the government numbers may be overstated when prices are rising, and understated when prices reverse course. And considering we are in the midst of a deflationary environment, except, say for gas prices in the last couple of months, this seems to be better news than at first glance.

Also, the government’s estimates for March could be somewhat understated, even with seasonal adjustments, since this year’s late Easter season pushed some sales that would typically occur in March into April. It might just be wishful thinking, but in a separate report by the International Council of Shopping Centers, chain stores’ same-store sales rose 0.8% last week, the first week of April.

The facts are there. Consumers are in deed cutting back, and by a whole lot. But this is the question I must ask. Are consumer habits changing permanently, whereas our consumer and debt-driven economy will suffer through years of stagnation, or is this just a case of extreme deflation coupled with devastating fear in an absolutely normal (yet severe) cyclical recession?

Report Details (via MarketWatch):

Sales of autos and auto parts fell 2.3% in March, a surprise in light of the 8% increase reported by the automakers. The government’s retail sales figures exclude fleet sales, which likely boosted the companies’ results.

Sales of electronics and appliances fell 5.9% in March. Sales of furniture fell 1.7%.

Sales at building materials stores dropped 0.6%.

Sales at gasoline stations fell 1.6% on a seasonally adjusted decline in prices. Gasoline prices typically rise more in March than they did this year.

Sales at the mall were weak. Sales at general merchandise stores fell 0.2%, including a 0.3% decline at department stores. Sales at clothing stores dropped 1.8%. Sales at stores catering to leisure-time activities, such as sports or reading, fell 0.9%.

Sales at food stores rose 0.5%. Sales at restaurants and bars fell 1.4%.

Sales at health and personal care stores rose 0.4%.

Sales at nonstore outlets, such as catalogs and online stores, fell 1.7%.

Retail sales had fallen for six straight months before this year.

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