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THE ECONOMY : 1989 Retail Sales Gain Weakest Since '82

January 13, 1990|From Associated Press

WASHINGTON — Retail sales increased just 5% in 1989, the slowest gain in seven years, and holiday spending was the weakest since 1985, the government reported Friday.

Analysts said the figures reflected a steepening slide in consumer spending, once an area of strength in last year's economy.

"It seems that consumer spending is dead in the water," said Samuel D. Kahan, chief economist at Fuji Securities Inc. in Chicago.

"The consumer basically is in hiding," said Walter Loeb, retail analyst at Morgan Stanley & Co. in New York, who credited bargain promotions for most of the consumer spending that did occur.

The Commerce Department said retail sales totaled $1.71 trillion last year. The 5% gain compared to 7.1% in 1988, and was the slowest since the 2.9% rise in the recession year of 1982.

December sales rose only 0.2% to a seasonally adjusted $144.4 billion, after rising 0.5% in November.

Because many consumers now begin their Christmas shopping just after Thanksgiving, many analysts combine sales in both months to assess holiday spending. Half or more of retail profits come from business done between Thanksgiving and Christmas.

The combined November-December sales were just 3.8% above the same period of 1988, which posted a 6.6% jump over the same months of 1987. The 1989 holiday gain was the most sluggish since the 2.9% rise in 1985.

Economist David Jones of Aubrey G. Lanston & Co., a New York government securities dealer, said consumers are spending only when they get a bargain.

"That's obvious in the case of auto incentives and all of the discounts at Christmas," Jones said. "Consumers did come out of their shell and spend at Christmas but only because department stores offered them discounts."

Many analysts said consumer spending will continue on that track, at least through the first half of the year.

Sales of durable goods--big-ticket items such as cars and household appliances expected to last more than three years--fell 0.6% in December after edging up 0.1% in November.

Durable goods, which often are financed by loans, have been particularly affected by tighter Federal Reserve credit policies and were the subject of vast promotions, especially in the automobile sector.

But most auto incentives ended with the introduction of 1990 models in October and motor vehicle sales dropped 0.7% in December on top of a 0.4% decline in November.

Auto sales, which represent about 22% of retail sales, ended the year up just 2.2%, compared to a 10.3% gain in 1988. It was the lowest since sales actually declined 8.1% in 1980.

Excluding autos, overall sales in December were up 0.4%.

Sales of durable building materials rose 0.1% on top of a 0.7% rise in November, while furniture and other home furnishings declined 1% after a 0.7% increase a month earlier.

Sales of non-durable goods rose 0.6% after gaining 0.8% in November.

Sales were up 0.6% at grocery stores and 1.3% at gasoline stations, both due in part to higher prices. Apparel sales advanced 0.1%.

RETAIL SALES

Seasonally adjusted, billions of dollars Dec., '89: $144.4 Nov., '89: $144.2 Dec., '88: $139.1 Source: Commerce Department

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