April 21, 2008—Retail sales, the Producer Price Index, and new residential construction all declined in March, signaling that the economy remains entrenched in a recession.

Retail Sales
Retail sales fell 1.1% in March. In February, total retail sales were upwardly revised from a 0.1% decline to a 0.3% increase. All categories except drug and grocery store sales posted declines in March, though sales were especially poor at electronic stores (-5.9%), auto dealers (-2.3%), and clothing stores (-1.8%). Core sales, which exclude sales made at gasoline stations and auto dealerships, posted a 0.8% decrease. On a year-to-year basis, top-line retail sales decreased 9.4%, while core sales are down 1.6%. The March figures diminished hopes that consumers were beginning to open up their wallets. The trend of weak or negative growth should remain in the near term as beleaguered consumers save cash because of continued economic uncertainty.

Consumer Price Index
The Consumer Price Index (CPI) decreased 0.1% in March, coming off a 0.4% increase in February. A 3.0% monthly decline in energy prices lead the overall decrease in the index. The core CPI, which excludes food and energy prices, increased 0.2%. On a year-ago basis, the top-line CPI dropped 0.4% while the core CPI is up 1.8%. Inflation appears in check as consumers, businesses, and government have pulled back because of the financial crisis. The latest figures reaffirm that fears of deflation are unfounded, especially since the core CPI, the true measure of inflation, has posted a 0.2% increase during the last three months.

Producer Price Index
Producer prices for finished goods decreased 1.2% in March, after rising 0.1% in February. The decrease comes as energy and food prices resumed their fall after a respite in January and February. Prices for core crude goods fell 1.6% while those for core intermediate goods fell 0.3%. However, prices for core finished goods were unchanged.

New Residential Construction
Housing starts plummeted 10.8% in March to 510,000 units, following a downwardly revised 17.2% increase in February. Permits for new housing also decreased, down 7.4% during March. Compared to March of 2008, housing starts are down 48.4%. While March's report cools some excitement over February's positive numbers, the housing correction is slowly nearing its end. With falling mortgage rates, a $7,500 tax credit offered to first-time home buyers by the stimulus package, and new, lower-priced homes offered by builders, buyers will slowly begin to reenter the market, but growth will be tempered by the glut of foreclosed homes on the market.