Retail Sales Up for First Time Since January : But 0.5% Gain in April Was Less Than Expected

Retail sales rose 0.5% in April, the best showing in four months, the government reported Tuesday, but economists said a jump in auto sales hid widespread weakness in other areas of consumer spending.

The April increase, the first since January, was considered disappointing because it was only half of what many analysts had been expecting.

The Commerce Department said sales, adjusted for seasonal variations, totaled $116.8 billion last month after declining 0.9% in March and 1% in February.

David Wyss, an economist with Data Resources of Lexington, Mass., said the weaker-than-expected April increase showed that high debt burdens were still holding back consumer spending.

He noted that consumer debt in March rose at the slowest pace in almost three years, suggesting that Americans are choosing to use extra cash to pay off old loans rather than incur new debt.

“The consumer is largely spent out,” Wyss said. “Lower oil prices just are not going to give us the kind of consumer boom that some people were looking for.”

The readiness of consumers to buy is seen as critical to economic growth because consumer spending accounts for two-thirds of all economic activity.

A Sluggish Quarter

Many forecasters are looking for continued sluggish growth in the April-June quarter but some strengthening in the second half of the year.

Commerce Secretary Malcolm Baldrige said the boom in housing sales this year, triggered by the big drop in mortgage rates, would “set the stage for faster growth in the second half.”

The Reagan Administration is predicting that the economy will expand at a 4% rate this year, nearly twice as fast as last year’s pace.

Sandra Shaber, director of consumer economics at Chase Econometrics in Bala Cynwyd, Pa., agreed that lower interest rates and declining oil prices would begin to have more of an impact in the second half.

“Furniture sales, travel, restaurant sales and soft goods will start showing better numbers,” she said. “Consumers are still interested in making major purchases if the price is right.”

The April increase in retail sales, the best showing since a 1.2% rise last December, was powered by a 4.1% jump in auto sales that marked the largest gain in that category in seven months.

But excluding autos, sales fell by 0.4%, the first decline since a 0.6% drop last June.

Analysts said this decline overstated the actual weakness. They noted that a 2.3% decline in gasoline sales actually reflected the huge drop in prices at the pump rather than a dip in consumer purchases.

Sales of durable goods--items expected to last three or more years--rose 2.8% last month following a 2.2% decline in March, reflecting the swing in auto sales. Sales of non-durable goods fell by 0.8% last month after dipping 0.1% in March.

Sales at hardware stores rose 5% in April, but sales at furniture stores dropped 1.6%. Sales at department stores and other general merchandise stores were up 1.1%.