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Higher Food and Gas Prices Impact Retail Spending

NEW YORK - Higher prices for gasoline and food negatively impacted consumers' spending on clothes and other non-necessities in April, according to a report by The Associated Press.

Cooler weather also seemed to hurt business, with companies across most sectors, even industry leader Wal-Mart Stores Inc., posting disappointing results. In addition, a fairly early Easter prompted many consumers to do their shopping in March, which depressed last month's business slightly.

"I feel (the price increases) are already hitting the low-end customer," Ken Perkins, research analyst at Thomson First Call, told the AP. He added that eight of 10 discounters missed earnings expectations in April.

Perkins noted that these consumers still haven't benefited from the economic recovery and are still worried about their jobs.

C. Britt Beemer, chairman of America's Research Group, based in Charleston, S.C., said a recent survey showed that anywhere from 8 percent to 11 percent of 1,000 consumers polled were changing the way they shop, including reducing their spending and looking more for coupons, because of the increased prices.

Retail Forward, a consulting firm in Columbus, Ohio, said that based on its latest ShopperScape Survey, it expects the recent strong pace of consumer spending at retail to ease in May but remain elevated.

"With the exception of the lowest-income households, rising optimism about jobs and incomes is keeping consumers in a spending mood," said Steve Spiwak, an economist with Retail Forward. "The slight drop in momentum is likely the result of tax refunds that have largely been spent. As a result, consumers may take a breather this month in the wake of the robust surge in spending so far this year," he added.

Retail Forward expects spending on gifts for Mother's Day (not including spending on services such as dining out, movies, etc) to also be buoyant. Greeting cards and flowers are expected to be the best-selling gifts.

Still, Retail Forward concurred that heightened pessimism continues to exists among low-income households (under $25,000), which will represent a drag on spending until the benefits of the expansion become more widespread. High gas prices, which have a disproportionate impact on people of modest means, are also likely casting a shadow on the moods of these households.
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