December's Retail Sales Slip Slightly : Factory Output Up; Figures Considered Relief for Economy

Associated Press

Retail sales slipped slightly in December, but the nation's factories were humming to a sharply faster beat and analysts said today's two government reports together spell more relief for the economy.

Except for sagging business in new-car showrooms, the December decline of 0.1% in retail sales reported by the Commerce Department would have been a 0.5% increase--even after the raw figures were adjusted downward to account for the Christmas shopping season.

For all of 1984, retail sales were up 10.4% over the previous year.

The Federal Reserve's industrial production report, meanwhile, showed that output at the nation's factories, mines and utilities shot up 0.6% in December, the biggest increase in five months.

Healthy Growth

"The two pieces together are just confirmation of our view that the economy did touch bottom in October and has been growing at a pretty healthy rate since then," said Robert Wescott of Wharton Econometrics in Philadelphia.

While the government was plugging two more pieces into the economic puzzle, more major banks, including Bank of America, the nation's largest, cut their prime interest rate a quarter point to 10.5% today.

The prime rate is now at its lowest level in 17 months, while the stock market is at its highest since November.

Michael Evans, president of the Washington forecasting firm Evans Economics, concurred with Wescott that the December retail sales figure was better than it might look at first glance.

'More Bullish'

"This is more bullish than I thought we were going to get," said Evans. "The economy should move right along until interest rates start going up again, probably about the middle of the year."

Commerce Secretary Malcolm Baldrige noted that retail sales rose at an annual rate of 10.5% during the last three months of the year but acknowledged that the pace might not be sustained.

"Continued growth in incomes indicates another good year ahead for retail business, but gains will be slower than in 1984," Baldrige said.

Noting that auto sales are a major component of the overall retail sales index tracked by the Commerce Department, Evans pointed out that auto industry figures showed increased sales in December, not a decline, and suggested that a reporting lag skewed the Commerce figures.

2.5% Increase

"You have a 2.5% increase since October (not counting autos) and that is not a bad increase," Evans said.

Also possibly contributing to the less-then-robust December figure was the 2% spurt in November that analysts attributed to early Christmas buying. They cautioned at the time that the early buying could cut into the December figure.

The 2.3% drop in auto sales--the first decline in four months--followed a 2.1% increase in November. Sales were still 6.1% above a year ago.

The Fed's industrial production report said gains were widespread in various industries.

Copyright © 2019, Los Angeles Times
EDITION: California | U.S. & World