A just released report by the Commerce Department shows that retail sales unexpectedly dropped by 0.4% in April, following a revised drop of 1.3% in March and analysts contributed the drop to the biggest loss of household wealth on record, falling home values and rising unemployment.

Most economists had predicted that retail sales would rise by 0.2% after a 1% decrease a month earlier.

Bill Cheney, who is the chief economist at John Hancock Financial Services Inc. said in an interview that, “The second quarter is going to be tough. Consumers are losing their jobs, concerned about losing their jobs and losing wealth”.

Mike Niemira who is the chief economist at ICSC was a little bit less downbeat and said, “We’re still working our way through the slowdown. I think it will get better as the year progresses. The month of May will still be tough and I suspect by the summer that things will be a little broader in terms of the improvement”.

The decline in sales was led by falling demand at furniture, clothing, grocery and electronics’ stores, and even as fuel prices rose, receipts at service stations fell, indicating perhaps that Americans were driving less.

Clothing sales fell by 0.5% and sales at general-merchandise stores fell by 0.1%.

Auto sales unexpectedly gained by 0.2% after dropping by 2% in March, with automobiles selling at a 9.3 million annual pace in April, compared with a 9.9 million rate in March.

Chrysler, whose U.S. whose sales were down by 48% from the same month last year, started offering rebates of up to $6,000 on May 6 and the offers will continue until the end of the month.

The Labor Department reported last week that payrolls fell by 539,000 workers last month making it the smallest drop since October, but it took the unemployment rate to 8.9%, which is the highest level since 1983 and economists expect it to average 9.6% in 2010.

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