WASHINGTON - Retail sales fell unexpectedly in March, delivering a setback to hopes that the economy's steep slide could be bottoming out.

President Barack Obama and Federal Reserve Chairman Ben Bernanke said in separate speeches Tuesday that while other recent economic signs have been hopeful, problems persist and a true recovery will take more time.

The Commerce Department said retail sales dipped 1.1 percent in March. It was the biggest decline in three months and a much weaker showing than the 0.3 percent increase that analysts expected.

A big drop in auto sales led the overall slump in demand. Sales also plunged at clothing stores, appliance outlets and furniture stores.

Meanwhile, the Labor Department reported that wholesale prices plunged 1.2 percent in March as the cost of gasoline, other energy products and food fell sharply.

Gas prices fell 13.1 percent, the steepest drop since December, while food costs dipped 0.7 percent. Excluding volatile food and energy prices, the Producer Price Index was unchanged, below analysts' forecasts of a 0.1 percent rise.

In an economic speech at Georgetown University, Obama highlighted signs of progress but warned Americans that "by no means are we out of the woods." He said a full recovery is some time off, and depends on two things: building a new foundation for the U.S. economy and making changes in the political landscape.

Bernanke said there's been "tentative signs" that the recession may be easing. But he also warned that any hope for a lasting recovery hinges on the government's success in stabilizing shaky financial markets and getting credit to flow more freely again.

"Recently we have seen tentative signs that the sharp decline in economic activity may be slowing," Bernanke said. "A leveling out of economic activity is the first step toward recovery. To be sure, we will not have a sustainable recovery without a stabilization of our financial system and credit markets."

In remarks at Morehouse College in Atlanta, Bernanke mentioned improvements in recent data on home and auto sales, home building and consumer spending as flickering signs of encouragement. But his speech was prepared before the retail sales and other data were released.

On Wall Street, stocks fell after the unexpected drop in retail sales outweighed better-than-expected profit reports from Johnson & Johnson and Goldman Sachs Group Inc. The Dow Jones industrial average fell about 130 points in afternoon trading and broader indices also slid.

In a separate report, the Commerce Department said business inventories fell for a sixth straight month in February.