NEW YORK — March retail sales showed encouraging signs that consumers are no longer cutting their spending, a key to finding a bottom to the recession.
Shoppers were still very cautious. They largely stuck to buying necessities like groceries in March and held back on bigger purchases, and same-store sales fell overall, results reported by an industry group Thursday showed.
But about half the 31 retailers that Thomson Reuters tracks reported same-store sales were better in March than analysts expected. And Gallup estimates that the average daily consumer spending it tracks rose from $53 in mid-March to $71 by the last week of the month. Gallup said their weekly Consumer Mood Index is the most positive it has been since February 2008.
Economists and analysts closely watch consumer spending because it accounts for 70 percent of all U.S. economic activity. The economy's steep contraction in late 2008 was caused in large part by the 4.3 percent drop in consumer spending in the fourth quarter; that was the largest drop in more than 28 years.
This year's late Easter skewed the results a bit. Analysts said a more consistent and complete picture of where consumer spending is heading this spring will emerge when March and April results are read together.
"On the surface results look weak but this is one of those months to say 'Yes, but...,'" said chief economist Michael Niemira with the International Council of Shopping Centers. "The tone from retailers' comments is better than the reported performance."
Overall same-store sales fell 2.1 percent in March, a bigger decline than analysts expected, according to the monthly tally from Goldman Sachs and ICSC. But last year's figures included Easter, which doesn't come until April 12 this year.
Once Easter is excluded, same-store sales actually rose 1 percent in March from a year earlier. Same store sales are considered a key metric of the retail industry's health because they exclude activity at stores that opened or closed during the year.
"An interesting dynamic is starting to unfold, what I call 'frugal fatigue,'" said Marshal Cohen, chief industry analyst at market research firm NPD Group Inc. "The consumer is beginning to say 'I know I have to save money, spend less and be cautious, but I still have a job, I still have needs and I still have to spend.'"
At the Manhattan Mall in New York, Brooklyn resident Maria Ahmad, 38, said she cut her spending when the shoe and accessory manufacturer where she works cut her pay two months ago. But two weeks ago she bought herself a pair of sunglasses she wouldn't have considered earlier.
"I felt, I work hard enough, I deserve it, so I treated myself," she said.
But other shoppers are holding back. Mennory McNamee, 57, a hairdresser from Long Island, said she's still mainly buying things on sale and only if she also has a coupon. She did splurge on a coat and pants recently because they were 75 percent off _ but she eventually returned the outfit.
"I really didn't need it so I took it back," she said.
Many Americans are remaining cautious, particularly in light of unemployment figures. The number of people continuing to receive unemployment insurance payments set a record for the 10th straight week, and the unemployment rate is expected to hit 10 percent later this year. On Thursday, however, the Labor Department reported that new jobless claims fell more than expected last week.
Another positive sign was that several retailers, including J.C. Penney Co., TJX Cos., American Eagle Outfitters Inc. and others, boosted or at least raised the low end of quarterly guidance.
Groceries, health products and accessories remain the most popular sellers, and the discount sector remained the standout. But Wal-Mart Stores Inc., usually an outperformer, said same-store sales excluding fuel rose 1.4 percent, a smaller rise than the 3.2 percent analysts polled by Thomson Reuters predicted. But the world's largest retailer blamed Easter for the miss and remained upbeat, saying first-quarter results will be at the high end of guidance.
Wal-Mart shares fell but investors seemed to cheer results on the whole. The Dow Jones U.S. Apparel Retail Index rose 10 percent.
Warehouse clubs suffered from the decline in gas sales. Costco Wholesale Corp. said same-store sales fell more than analysts expected, but figure rose excluding gas deflation and the stronger dollar. Similarly, BJ's Wholesale Club Inc. said same-store sales slipped 0.1 percent, but rose by 8.5 percent excluding gas sales.
At the mall, some specialty retailers performed better than expected, as concentrated efforts to slash costs and cut inventory appeared to be paying off.
Gap Inc. said same-store sales fell 8 percent, but that was a smaller drop than analysts predicted. Gap has focused on improving Old Navy results after years of sagging sales, and the effort seemed to be working. While same-store sales fell in the double digits at Gap namesake stores and Banana Republic they were flat at Old Navy.
Old Navy "is doing a much better job at communicating its value message with its national TV ad campaign, amid a tough economic environment where customers are seeking great value," said Stifel Nicolaus analyst Richard Jaffe.
Amid the department stores, mid-tier players showed improvement while the luxury sector remained weak. Nordstrom Inc., J.C. Penney Co. and Kohl's Corp. all reported same-store sales drops that were smaller than analysts expected. However, luxury sellers Saks Inc. and Neiman Marcus reported steep drops.
Teen retail remained a bright spot, with The Buckle Inc. and Hot Topic Inc. both reporting strong results.