Retail Sales Advance 0.9% in April : Installment Debt Increases by $8.34 Billion in March
Retail sales climbed 0.9% last month in what the Reagan Administration and some economists Tuesday viewed as an encouraging signal that the economy is reviving after a sluggish first quarter.
Separately, the Federal Reserve reported that Americans took on $8.34 billion more in installment debt in March than they paid off.
The Commerce Department said retail sales, boosted by a rebound in demand for automobiles, rose to a seasonally adjusted total of $112.2 billion in April following a 0.7% drop in consumer spending the month before.
The March decline represented a revision from an earlier report that put the decline at a much steeper 1.9%.
Commerce Department analysts said the big revision in the March sales figure stemmed from upward revisions across most categories.
The analysts said that the preliminary data, collected from a small group of firms, often is revised substantially once all reports are obtained from the total group of retail stores surveyed.
Some economists interpreted the April increase and the upward revision in the March data as favorable signs that consumer spending is regaining lost momentum and will help to boost overall economic growth in coming months.
“Retail sales in April are very supportive of the view that we will have a rebound in growth in the second quarter,” said Allen Sinai, chief economist for Shearson Lehman Bros.
Sinai predicted growth from April through June of about 3.5%. This would be substantially stronger than the January-March rate of 1.3%--the weakest pace since the end of the last recession.
Economy Still ‘Strong’
At the White House, presidential spokesman Larry Speakes said the new report showed that “the economy, as a whole, is still strong and healthy.”
Speakes noted that interest rates have been declining on the favorable news that the Senate last Friday adopted a budget package that would trim $56 billion from the deficit in the next fiscal year.
He said the interest-rate drop showed “just how robust the recovery will continue to be if the House of Representatives will now match the Senate’s resolve to reduce budget deficits.”
Some private analysts, however, were less optimistic about the current state of the economy.
Sandra Shaber, director of consumer economics for Chase Econometrics, predicted further gains in consumer spending in May and June as Americans get their delayed federal tax refunds. But she said the recovery overall has entered a slower stage of growth.
“What we have ahead of us is very sluggish growth in consumer spending. The boom is over,” she said.
John Maher, vice president for information services at Citicorp, said consumer spending currently remains “relatively weak,” noting that after inflation is taken into account, spending has been flat for several months.
But he predicted a sizable rebound in economic growth in the second half of the year, spurred by looser credit conditions on the part of the Federal Reserve Board.
The report on April retail sales showed that the strength came in part from a 1.6% jump in sales by automobile dealers, following a 2.3% decline in March. However, some analysts said they doubted that the current high level of auto sales--7.6% above a year ago--is sustainable for much longer.
Despite the April gain in car sales, consumer spending for all durable goods was up only 0.6% in April, following a 1.2% March decline.
Growth in durable goods--items expected to last three or more years--was held back by a 1.2% drop in sales at furniture stores and a 1.2% decline in sales at hardware stores.
But Robert Ortner, chief economist for the Commerce Department, said these categories should show increases in coming months, following recent gains in housing construction.
Sales of non-durable goods rose 1.5% last month, regaining much of the ground lost from a 1.7% decline in March.
Department store sales were up 1.9%, following a 2% March decline.
Sales at specialty clothing stores recorded a 0.4% gain while sales at grocery stores were up 1.5%. Sales at restaurants and bars dropped 1.7% last month, following a 0.5% April increase.
All the figures are adjusted to account for normal seasonal variations.
The March increase in consumer installment debt was 7.7% below the $9.04-billion advance registered in February, according to the report by the Federal Reserve Board. The February increase originally had been reported as a much higher $10.37 billion.
Economists said the strong debt gains in February and March were coming at a time when the amount of consumer debt compared to personal income is at a level of almost 15%.
Joseph Hurd, an economist with Crocker National Bank in San Francisco, said this “extremely high” debt level raised concerns about how much consumers would be able to increase spending in coming months.
“Given that consumers are in debt so much, they may not be willing or able to take on new debt to buy the items they usually purchase on credit, like furniture, appliances and cars,” Hurd said.
