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Retail Sales Decline by 0.4% in September

October 16, 1987|Associated Press

WASHINGTON — Retail sales fell by 0.4% in September after a strong summer, the government said Thursday, and economists said the weakness was likely to continue as debt-laden consumers cut back spending.

The Commerce Department said retail establishments sold $128.8 billion worth of goods last month, down $500 million from the August sales level after adjusting for seasonal variation.

The decline was led by weakness in auto sales, which fell 1.4% in September after a 5.7% increase in August.

Analysts had expected the drop as car dealers phased out their end-of-model-year incentive programs. But retail sales, excluding autos, also edged down, 0.1% following a 0.6% increase in August.

"I think that the strength in (July and August) was essentially in the auto sector, and now that that is over I think the consumer sector of the economy is going to settle into a sluggish pattern at best," said Undersecretary of Commerce Robert Ortner.

It was the first monthly drop in overall retail sales since May, when sales dipped 0.1%, and the biggest drop since January, when sales fell 7.1%. Sales had risen 1.7% in August following increases of 0.6% in July and 1.2% in June.

For the first nine months of the year, sales were up 4.3%, compared to a 5.1% rise during the same period last year.

Michael K. Evans, who heads an economic consulting firm in Washington, called the September report "a harbinger of what's ahead."

"You could be looking at a recession next year . . . if interest rates keep going up the way they have been. It's not here yet, but it looks more likely every week," he said.

"We know auto sales are going to be weak in October," said Lawrence Chimerine of Wharton Econometrics in Philadelphia. "If the rest of the sales are sluggish as well, it clearly shows we are getting a shift in the economy. It's very tough to get strong growth when consumer spending is sluggish."

However, Ortner said that if retail sales grow slowly, "the economy can continue to grow at a decent rate, led by growth in exports."

Sales of durable goods, big-ticket items expected to last three years or more, fell 0.9% in September.

The decline in auto sales and a 1.0% drop in sales of furniture and home furnishings more than offset a 1.2% climb in sales at hardware and building supply stores.

Sales of non-durable goods fell 0.1%, dragged down by a 0.5% decline at department and other general merchandise stores and a 0.4% drop at grocery and other food stores.

Sales were up 0.6% at clothing stores, following a 0.2% decline in August that had been attributed to delayed back-to-school sales caused by Labor Day falling later in September than usual.

Sales were up 0.7% at gasoline stations, up 1.1% at restaurants and bars and up 1.2% at drug stores.

"On services and non-durables, consumers continue to spend nicely," said Allen Sinai, chief economist at Shearson Lehman Bros., a New York brokerage.

Because both husband and wife work outside the home in a growing number of families, spending on "clothing, food, travel, eating out will likely continue to be strong," he said.

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