Forex

WASHINGTON - US consumers piled on another piece of evidence that the economy is in or heading for a recession last month as sales fell across almost the entire range of retailers.

The Commerce Department said February retail sales plunged 0.6 pct, as auto dealers and gasoline stations, as well as 'core' retail outlets, reported major declines.

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 pct point Fed rate cut on Tuesday.'

The 0.6 pct fall was more than even the worst estimate of a 0.5 pct drop from economists polled by Thomson's IFR Markets. The median forecast was for 0.2 pct increases both with and without auto sales included.

Auto sales fell 1.9 pct, and excluding autos, February retail sales were down 0.2 pct.

Gasoline prices were off approximately 2 pct last month and the price effect helped produce a 1.0 pct decline in gas station sales. However, economists say actual gallon volume has also been falling as consumers cut back on discretionary driving.

Excluding gas stations, sales were down 0.5 pct and excluding both autos and gasoline, retails sales were down a much less severe 0.1 pct.

'On balance, this report is troubling,' said TD Securities economist Charmaine Buskas. 'It suggests that the consumer is feeling the pinch of a softening job market, higher prices for key goods, and the other macroeconomic

headwinds that currently weigh on the U.S. economy.'

General merchandise stores, including discounters such as Target and Wal-Mart, were the major exception to the retreat in consumer spending, posting a 0.4 pct increase for February.

Clothing, health care and sporting goods stores also reported sales increases for the month. Housing-related and other generally big-ticket stores including furniture, electronics and building materials showed declines.

Stephen Gallagher of Societe Generale still expects a 0.50 pct cut next week. While such signs of weakening in the economy are driving the Fed's rate path, he doesn't think today's report is a deciding factor.

'The precise size of next week's cuts still hinges on fragile market conditions and a need to respond to very weak confidence in the markets. To the extent that these gasoline figures show lower immediate headline inflation, the Fed could gain some room.'

The February Consumer Price Index inflation reading comes out tomorrow and 'the underlying energy price, weak dollar pressures are not seriously changed,' Gallagher said.