Retail sales unexpectedly showed a significant decrease in the month of March, according to a report released by the Commerce Department on Tuesday, although the report also showed an upward revision to February sales.

The report showed that retail sales fell 1.1 percent in March following a revised 0.3 percent increase in February. Economists had expected sales to increase by 0.3 percent compared to the 0.1 percent decrease originally reported for the previous month.

Notable decreases in most categories contributed to the unexpected decrease in retail sales, with sales by electronics and appliance stores showing a particularly steep 5.9 percent decrease.

Sales by motor vehicle and parts dealers also showed a considerable decrease, falling by 2.3 percent in March following a 3.0 percent drop in February.

Excluding the drop in auto sales, retail sales still fell by 0.9 percent in March compared to an upwardly revised 1.0 percent increase in the previous month. Economists had been expecting ex-auto sales to come in unchanged.

Noting that early year discounts are abating as the year progresses, Dan Greenhaus, equity strategist at Miller Tabak & Co. said, The conversation will again return to whether the consumer is in a place to pay full price for goods that were very recently 70-80 percent off.

The unexpected decrease in retail sales in March was likely due to in part to calendar adjustments, with the sales in March of 2008 boosted by an early Easter. With the holiday pushed back until April this year, some spending may have been delayed.

Meanwhile, the Commerce Department noted that total sales for the January through March period were down 8.8 percent compared to the same period a year ago.

In other economic news, the Labor Department said that its producer price index fell 1.2 percent in March following a 0.1 percent increase in February. The steep drop in prices came as surprise to economists, who had expected the index to come in unchanged.

A significant 5.5 percent decrease in energy prices contributed to the unexpected decrease in producer prices, with food prices also showing a more modest 0.7 percent drop.

Excluding food and energy prices, the core producer price index was unchanged in March compared to a 0.2 percent increase in the previous month. Economists had been expecting core prices to edge up by 0.1 percent.

Greenhaus said, For some reason, people have gotten optimistic about short term inflation, but as I noted last month, the prospect of further price declines as we enter warmer months is very real and that prospect has not abated at all.

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