Retail Sales Up a Modest 1.1% in November

Retail sales rebounded slightly in November from their record fall the month before, but the modest 1.1% increase still left doubts among many analysts about just how good a Christmas merchants can expect this year.

The Commerce Department reported Thursday that sales climbed to $115.9 billion last month, an increase of $1.3 billion over the depressed October level.

Sales had fallen 4.2% in October, the biggest monthly decline on record, as car sales plummeted by 17.2% after dealers stopped most of the cut-rate financing incentives that had spurred a frenzy of car buying in August and September.

With Americans holding a record amount of personal debt, many analysts have expressed fears that consumer spending will show little strength in the months ahead. Since consumer spending accounts for almost two-thirds of overall economic activity, these analysts believe the economy as a whole will be lackluster in coming months. However, the Reagan Administration said the November sales gain points to stronger economic growth.

“Nearly every category of the economy continues its strong performance,” said presidential spokesman Larry Speakes. “We look forward to second-half growth in the gross national product in the 5% range, and we expect 1986 GNP growth of 4%.”

While the economy grew at a 4.3% rate in the third quarter, many analysts are looking for growth in coming months to be only about half that pace, in large part because of expected weak consumer spending.

“We are getting an increasing amount of evidence that the consumer is not going to be driving the economy in coming months,” said Sandra Shaber, senior economist at Chase Econometrics, a private forecasting firm. “We are in for a period of fairly anemic growth in consumer spending.”

Consumers are likely to benefit from the sluggish sales as retailers slash prices before Christmas, analysts said. Shaber said this price cutting was already taking place, but she said the discounts are likely to be smaller than last year because retailers have kept inventories lower.

She predicted that Christmas sales, after discounting for inflation, would rise by about 4% this year from the 1984 level. This would be down from the 5% gain recorded last year and the 7% increase in 1983.

While some of the country’s giant retail chains are reporting brisker-than-expected sales since Thanksgiving, many analysts said the weak income growth this year and record high consumer debt burden would likely hold sales gains back.

Robert Ortner, chief economist for the Commerce Department, noted that consumer spending for October and November is still below the average of the July-to-September period.

“I think the consumer will continue spending, but it may be sluggish for awhile,” he said.

In November, auto sales rose a slight 0.9% to a seasonally adjusted monthly figure of $24.8 billion, far below the $29.7 billion in cars sold during September.

Without autos, total retail sales rose 1.2% last month, the best gain since a 2% April increase.

Gains in the non-auto category were led by a 1.3% increase in department store sales, following a weaker 0.3% October rise.