Retail Sales Increase 0.7% in January

Retail sales rose 0.7% in January as a big spurt in auto buying overcame sales declines at clothing and department stores, the government said Wednesday.

While the Reagan Administration hailed the increase as a signal of further economic expansion, many private analysts said the gain was not nearly as strong as the overall number would indicate.

The Commerce Department report said sales by U.S. retailers climbed to a seasonally adjusted $110.69 billion in January, despite record cold weather in many parts of the country. The increase compared to a 0.5% decline in December and a 1.5% gain in November.

Satisfying Demand

Sales by auto dealers rose a sharp 4% in January, a gain attributed in part to consumers satisfying demand for popular models that were in short supply before. Without the big auto gain, retail sales would have actually edged down 0.1% during January.

Commerce Secretary Malcolm Baldrige, dismissing the lopsided nature of the report, proclaimed the January sales “very good” and said prospects in coming months looked even better because of recent gains in income, continued high levels of consumer confidence and lower interest rates.

“The trend upward in consumer purchases means further growth in domestic production and jobs during the coming year,” Baldrige said.

But Allen Sinai, chief economist for Shearson Lehman Bros. Inc., said the January sales figure “suggests that the retail side of the economy is only in a mild upturn. This points to a continuing advance in consumer spending but only at a modest pace.”

Sandra Shaber, director of consumer economics for Chase Econometrics, a private forecasting firm, termed the non-auto sales performance “anemic” but said it was not a signal of an impending slump in spending.

“Consumer demand is not going to grow like it did last year, but there is still room for moderate expansion,” she said. She predicted that consumer spending, after adjusting for inflation, would rise by about 3.5% this year, compared to a 5% increase in 1984.

Weaker Performance

Economists noted that the new report showed substantially weaker sales performance in both December and November than originally reported.

The December decline had originally been put at a smaller 0.1%, while the November increase was cut from an original 2% gain.

Michael Evans, head of a Washington forecasting firm, said these changes would force a downward revision in estimates of overall economic growth in the last three months of the year. He predicted that the current projection of 3.9% growth in the final quarter would be shaved to 3.4%.

The weaker January sales number also raised questions about first-quarter growth, although most economists said they believed that a growth rate of 4% was still likely.

The department’s report blamed the “record cold during the month” for part of the weakness in sales of non-durable goods, such as clothing.

Department store sales fell by 5% during January, and sales at stores specializing in clothes were down 5.1%, the biggest monthly decline for this group in more than seven years.