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Retail Sales Up Slight 0.1% in January

February 14, 1986|Associated Press

WASHINGTON — Retail sales rose a weak 0.1% in January as big setbacks at department stores and clothing stores offset strong consumer demand for new autos, the government reported Thursday.

The Commerce Department said the January performance was the poorest since sales plummeted 3.9% in October after auto makers ended their first round of cut-rate financing incentives.

While auto sales showed a good 0.9% gain in January, reflecting a resumption of the financing deals, sales at department stores dropped a sharp 2%, the second monthly decline. Total consumer sales climbed to a seasonally adjusted $117.5 billion last month.

Some private analysts speculated that the big boom in car sales had drained away money that consumers normally would have spent on purchases of clothing and appliances.

Lea Tyler, an economist at Chase Econometrics, said the weak January showing was not cause for alarm given the fact that employment levels have been rising sharply in the past two months. She said these increases would fuel further growth in personal incomes and consumer spending in the months ahead.

However, she and other economists said the spending gains would not be as large this year as in 1984 and 1985 because consumers are now saddled with high debt and low savings. She predicted that consumer spending would grow by 2.6%, down from the 3.2% rise in 1985.

"Consumers are retrenching somewhat from the blistering pace of spending and borrowing of the past year," said Allen Sinai, chief economist for Shearson Lehman Bros. "But there is nothing in the data to suggest a major collapse in consumer spending that would threaten what increasingly looks like an upbeat year for the economy."

Forecast Raised

Sinai said the recent sharp declines in oil prices had prompted him to raise his forecast for economic growth, as measured by the gross national product, to 3.7% for 1986. This would represent a major rebound from the sluggish 2.5% rate turned in last year.

The Reagan Administration is predicting growth of 4% this year, with much of that optimism based on a belief that consumer spending will remain strong.

In a statement issued in his behalf, Commerce Secretary Malcolm Baldrige said all the signs were pointing to "solid growth in household spending this year."

"Consumer confidence is high because of the continuing growth in employment and incomes, low inflation and declining interest rates," the statement said.

The 0.9% rise in auto sales last month followed a robust 4.4% increase in December. Sales of new cars were spurred in both months by the resumption of financing incentives. Without the strength in autos, total retail sales would have fallen 0.2% in January.

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