WASHINGTON (AP) -- Consumers, battling soaring gasoline prices and a slumping economy, cut back further on their spending in April.
The Commerce Department reported Tuesday that retail sales dipped 0.2 percent last month, right in line with economists' expectations.
It was the second drop in the past three months and was led by a 2.8 percent decline in auto sales, the biggest setback in this category in 10 months. It reflected the problems that automakers are having as a weak economy and soaring gasoline prices cut into demand for new cars.
Excluding autos, retail sales rose by 0.5 percent, a better performance than had been expected as sales at general merchandise stores, a category that includes big chains such as Wal-Mart, posted a 0.5 percent increase, much better than the tiny 0.1 percent rise in March.
However, sales at department stores were down 0.1 percent, indicating that tough economic times may be pushing people to seek out bargains at giant discount stores.
In other economic news, the Commerce Department said that business inventories edged up a tiny 0.1 percent in March, the smallest advance in a year and another sign of the weakening economy.
The small inventory rise was below the 0.4 percent increase that many economists were expecting and was an indication that businesses are holding back on adding to their stockpiles in the face of slowing demand.
Many analysts believe the economy has slipped into a recession. However, overall economic growth, as measured by the gross domestic product, has not yet turned negative.
The Bush administration is hoping that a $168 billion economic stimulus package, which includes about $100 billion in direct payments to households, will give the economy a jump-start. The government started making those payments at the end of April.
The Federal Reserve launched an aggressive campaign last September to cut interest rates in an effort to deal with the weakening economy and a severe credit crisis. The central bank cut the federal funds rate for the seventh time last month but indicated it might now pause, with some Fed officials expressing worries that higher inflation could be triggered if interest rates were driven even lower.
Federal Reserve Chairman Ben Bernanke said in a speech Tuesday that the turbulent financial market had eased somewhat but that the situation remained "far from normal." He said the Fed's actions, which included an unprecedented move to allow investment banks to borrow directly from the Fed, "seems to have bolstered confidence."
The 0.2 percent drop in retail sales in April followed a 0.2 percent rise in March and a 0.5 percent decline in February.
Sales at clothing and specialty stores posted a 0.7 percent increase in April while sales at electronics and appliance stores were up 1.4 percent.
Sales at furniture stores edged up a slight 0.1 percent. This sector has been under pressure, reflecting the prolonged two-year slump in home sales.
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