Retail Sales Dip Raises Worries About Recovery

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.

Pedestrians walk by a men's clothing store that is going out of business April 14, 2009 in San...

Pedestrians walk by a men's clothing store that is going out of business April 14, 2009 in San Francisco, California. Retail sales fell for a second straight month in April, a disappointing performance that raised doubts about whether consumers were regaining their desire to shop. A rebound in consumer demand is a necessary ingredient for ending the recession.

(Justin Sullivan/Getty Images)

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, where the Dow Jones industrial average slid 184 points — more than 2 percent. Other major indexes fell even more sharply.

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.

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"People are obviously still very nervous and not spending," said David Wyss, chief economist at Standard & Poor's in New York. "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.