Thursday focus: Shopping life

Did shoppers splurge on spring outfits or gardening gear in March, or keep their wallets shut?

Signs about whether consumers have started shopping again will appear today when retailers report their March sales figures.

But any gains would likely be fragile, as shoppers are still being buffeted by conflicting reports about whether the economy is stabilizing.

While there are some pieces of good news – consumer confidence steadied in March after falling to an all-time low in February – the unemployment rate is the highest since late 1983 and may be keeping people from spending more freely.

After the sharp drop in consumer spending last year, Moody’s chief economist John Lonski says he expects it to edge up in the first quarter as people start to believe that “the Great Depression 2 is not at hand.”

“Consumers, while not very confident about the economy, no longer fear Armageddon,” Lonski said. “Consumers cut back so sharply on spending in the final quarter of 2008, in order to simply maintain their customary standard of living, or approach it, they’re essentially forced to step up expenditures.”

Overall, analysts expect that sales at stores open at least one year, a key retail metric known as same-store sales, are likely to fall for the sixth straight month in March. The decline could moderate, though – in February, same-store sales fell less than expected.

Shoppers are still responding to sales and low prices. Standard & Poor’s analyst Marie Driscoll says she thinks sales growth at discounters will be driven by grocery purchases, although some discretionary spending areas like home goods and electronics may show signs of stabilizing.

Of the more optional purchases, dresses and accessories are likely to be popular – but stores like Wal-Mart and off-price retailers such as TJX Cos. that focus on value and markdowns are still expected to perform better than most.

Consumers are facing a variety of headwinds. Last week, the Labor Department said the unemployment rate rose to 8.5 percent in March, the highest level in more than 25 years.

Associated Press