Agence France-Presse . Washington

US retail sales slumped more than expected in February as consumers retrenched in the face of economic turmoil and rising energy costs, the government reported Thursday.

Overall February retail sales fell 0.6 per cent from January, the Commerce Department said. Core retail sales, excluding volatile motor vehicle sales, dipped by 0.2 per cent.

Economists closely monitor the core reading as a truer indicator of consumer spending that drives the economy.

The 0.6 per cent fall in the headline number was far steeper than analysts’ consensus forecasts of a 0.2 per cent decline in both indicators. The report showed declines in a broad range of categories from autos to home furnishings to food.

This report is ‘the final piece in the recession puzzle,’ according to BMO Capital Markets economist Sal Guatieri, ‘upping the odds of a 0.75 per centage point Fed rate cut on Tuesday.’

The Federal Reserve has slashed its base federal funds rate by 2.25 points since September in a bid to boost economic momentum which depends largely on consumer spending. Most analysts expect the Fed to again lower the rate, currently at 3.0 per cent at its meeting next Tuesday. After the retail report’s release, president George W Bush’s administration urged US consumers to shop.

‘We do want to see the consumer spend, and that’s one of the reasons for the rebate checks,’ White House spokesman Tony Fratto said, referring to a key component of a stimulus package valued at 168 billion dollars. The February report showing Americans were closing their wallets heightened concerns the world’s biggest economy is falling into, or already is in, recession.

Economists generally define recession as two consecutive quarters of economic contraction. The ‘very dismal retail sales number ... puts us closer to at least one quarter of negative growth,’ said Peter Cardillo, an analyst at Avalon Partners. Robert Brusca at FAO Economics said that ‘on balance, the data are bad but not terrible.’

Brusca said it was ‘still not clear’ whether there was enough weakness to make negative GDP growth in the first quarter, after an anemic 0.6 per cent pace in the 2007 final quarter and robust 4.9 per cent growth in the third quarter. ‘With consumption this weak, look for imports to remain weak and inject some growth back in,’ he added.

Auto sales fell 1.9 per cent in February. Petrol prices were off approximately two per cent last month. Economists say actual sales volume of motor fuel has been falling as consumers cut back on discretionary driving.

Excluding gas stations, sales were down 0.5 per cent and excluding both autos and gasoline, retail sales were down a much less severe 0.1 per cent.

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