Retail Sales Decline Most in 7 Years : Dip in Demand for Automobiles Blamed for Drop of 1.9%

Retail sales, held back by a dip in demand for autos, fell 1.9% in March, the biggest decline in more than seven years, the government reported today.

The Commerce Department said sales totaled $110.5 billion last month contrasted with a record $112.7 billion in February.

February sales had risen a strong 1.6% over the January level, leading many analysts to believe that consumer demand was reviving and would provide momentum to keep the economy moving in coming months.

Analysts cautioned against reading too much into the big March decline, saying it reflected in part an overstatement of the strength of sales in February.

Michael Evans, head of Evans Economics, a Washington forecasting firm, said the weak sales in March stemmed from a variety of factors that have held the economy back since last summer.

“The decline in retail sales reflected the continuing effects of the economic slowdown and sluggish growth in wages and salaries that we have had for several months,” he said. “But I think we are about to snap out of this. This is the end of the bad numbers, not the beginning.”

The overall economy grew at an annual rate of only 2.1% in the first three months of the year, according to preliminary government estimates. This is well below the 6.8% growth rate for all of 1984 and also below the 4% growth the Administration is looking for in 1985.

The March sales drop was the biggest decline since a 2% fall in January, 1978.

Auto sales dropped 4% in March on a seasonally adjusted basis over the level of sales in February. Auto industry analysts disputed the size of the drop, however, pointing out that sales before adjusting for seasonal factors actually rose 15.4% in March over February. However, auto sales normally rise by 19.4% from February to March every year. Therefore, the Commerce Department figures showed a 4% decline in auto sales on a seasonally adjusted basis.

Even with the March seasonally adjusted decline, auto sales were still a strong 10.4% above the level in March a year ago and U.S. auto makers are predicting that strong sales will continue in coming months.

Excluding autos, retail sales would have fallen 1.4% last month as most of the major categories suffered a slump in demand.

Sales of durable goods, items expected to last three or more years, dropped 2.4% while sales of non-durable goods were down 1.7% from the previous month.