WASHINGTON (AP) -- Consumers, beset by a credit crunch, rising energy and food costs and a prolonged housing slump, boosted spending only slightly in March
The gain reflected soaring gasoline costs rather than any real strength in demand, however.
The Commerce Department reported Monday that retail sales edged up 0.2 percent in March after a 0.4 percent decline in February. However, without a 1.1 percent jump in sales at gasoline service stations, retail sales would have been flat last month.
Economists said the March report did nothing to dispel their worries that the country has either toppled into a recession or is very close to a downturn as households have been battered by a series of blows and now are facing rising layoffs.
"Don't expect to see consumers return any time soon," said Bernard Baumohl, managing director of the Economic Outlook Group. "They're going to be hibernating for the balance of the year, nursing the wounds that stem from the worst job market in five years, the highest drop in home prices in more than half a century, record high gasoline prices and the worst credit crisis since the Great Depression."
Last week, the University of Michigan's consumer sentiment index for early April plunged to the lowest reading in 26 years, reflecting in part a third straight month of job losses in March and a rise in the unemployment rate to 5.1 percent.
Many analysts believe the sustained rise in layoffs is the strongest sign yet that the economy has slipped into its first recession since 2001. The Bush administration, which has yet to call the current slowdown a recession, insists a $168 billion economic stimulus plan will help jump-start the economy when checks begin arriving for 130 million households next month.
President Bush told members of his Cabinet on Monday that those stimulus checks will be "an important part of making sure this economy begins to recover in a way that will add confidence and hope."
The day before the April 15 tax filing deadline, Bush also called on Congress to make his first term tax cuts permanent as another way to boost the economy by eliminating "economic uncertainty" in the tax code.
But Senate Majority Leader Harry Reid said making Bush's tax cuts permanent would help multimillionaires and special interests, not average working Americans.
Reid said stagnating incomes and rising health care, education, food and energy prices are squeezing middle-class families, who are looking for a change in U.S. economic policy - "not the same economic ideas that got us into this mess in the first place."
On Wall Street, stocks finished a quiet session with the Dow Jones industrial average rising by 23.36 points to close at 12,302.06.
The 0.2 percent increase in retail sales was slightly better than the 0.1 percent increase that analysts had expected but outside of the big jump in gasoline prices, sales in other areas either declined or posted lackluster gains such as the 0.2 percent rise in auto sales. Analysts questioned even the small rise in auto sales, saying the government statistics did not square with industry reports showing big declines in unit sales in March.
Sales at department stores and general merchandise stores fell by 0.6 percent in March while sales at specialty clothing stores were down 0.5 percent. Demand at these stores was hurt by an extremely early Easter, which came at a time when most of the country was blanketed by frigid weather that depressed demand for spring clothes.
Sales were also down at furniture stores, building supply stores and appliance stores, all areas where demand has been hurt by the bursting of the housing bubble. In addition to the 1.1 percent increase in sales at gasoline service stations, sales were up 0.3 percent at grocery stores, a gain that probably reflected continued big rises in food costs.
Consumers are battling a number of problems, from soaring energy prices which have pushed gasoline pump prices up to record levels well above $3 per gallon, to a prolonged housing slump that has seen home prices plummet in many parts of the country, leaving consumers feeling less well off.
In other economic news, the Commerce Department said Monday that inventories held by businesses on shelves and backlots increased by 0.6 percent in February after an even bigger 0.9 percent gain in January.
The increase in inventories, while boosting overall economic output in the first quarter, will likely act as a drag in coming months as businesses cut back on production to reduce stockpiles to more comfortable levels.