LINDA WERTHEIMER, host:
The bargains were out there, but customers did not care. That's what federal reports on consumer prices in retail sales showed this past week. The Labor Department found that consumer prices were lower this March than the same month a year ago, and that's the first time that has happened since 1955. But the low prices did little to lure consumers. A Commerce Department report said retail sales still fell in March.
NPR's senior business editor, Marilyn Geewax, is here to help us understand why shoppers are staying home. Marilyn, first, tell us about these falling consumer prices. What's going on?
MARILYN GEEWAX: In March prices were down and that was a shock. Last year at this time we were talking about how much everything was going up. I remember writing stories last spring about how Memorial Day picnics would be ruined because the price of eggs would be so high, and tomatoes were up, and corn was up and beef was up.
And this year what we find is when we come back and look at the data, prices are actually lower than they were last year. Just one example, a dozen eggs last March, $2.20 for a dozen grade A eggs, this March, it was $1.69. That's a very big price drop.
WERTHEIMER: But why is that amazing? I mean, oil prices dropped a huge amount. And farmers at the farmers market that I frequent told me that the reason they were raising their prices was gas.
GEEWAX: Well, sure. Last spring we were seeing gasoline prices were on their way to almost a $150 a barrel, and now they've plunged far below that, you know, anything we had imagined last spring. But we're also seeing a global drop in demand for food. People are just not eating as much food as they were because we're poorer this year. And that decline in demand has resulted in a drop in prices.
WERTHEIMER: So, what are the best bargains? Is everything cheaper? Is it just groceries? What?
GEEWAX: Well, it's not a bargain if you're a smoker. Smokers saw the prices go up about 11 percent last month because there's a new federal tax that was coming out and ahead of it, the tobacco companies thought, well, what the heck, if there's a new tax, let's just run up the price of cigarettes.
But other things were very, very cheap. Hotel rooms are a bargain, airfares are a bargain. So, if you're a non-smoking, travel-loving, hotel-hopping consumer, this is a very good time to find bargains.
WERTHEIMER: Apparently those bargains are not attractive enough to get people into shopping malls.
GEEWAX: That's right. The Commerce Department had a separate report that showed that retail sales were down 1.1 percent last month. And they were down in just about every sector. If you were a car dealer, if you're an electronics store, if you're a restaurant, they were all down because people are worried about their jobs and they can't get credit the way we used to. You know, remember when we'd open our mail and there were all those credit card offers, or you could get home equity loans very easily? We're just not in that loose credit environment that we were in a couple of years ago.
WERTHEIMER: So, how much does that matter that people are not shopping? You know, in some sense, I suppose, it's - people are being sensible.
GEEWAX: Well, it is sensible to save your money if you think that you're going to lose your job. But on the other hand, consumer spending fuels about two-thirds of all U.S. economic activity. So, if we stay home and sit on our wallets, that might be good for us personally, but it's not so great for pulling the country out of this recession.
WERTHEIMER: How long do you think this gloomy mood is going to last?
GEEWAX: That's hard to say because just the way you - you look at the stock market, investors take one step forward, two steps back. We're sort of tentative about where we're going with our investments. And it's the same thing with shopping. First it looks like maybe it's picking up, and then we fall back again.
But now, the latest turn is, as of Friday, the University of Michigan put out a consumer sentiment poll and that showed that in the first couple of weeks of April, a little bit of a brighter mood is coming over consumers. And that's largely, they think, because people feel somewhat optimistic about the president's proposals for economic recovery. But if those hopes don't really translate into jobs, and better earnings and higher incomes, then maybe that optimism will fade fairly quickly.
WERTHEIMER: Thank you, Marilyn.
GEEWAX: You're welcome.
WERTHEIMER: Marilyn Geewax is NPR's senior business editor.
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