Retail Sales Rise Just 0.1% in July

Retail sales rose a tiny 0.1% in July as strength at department stores and furniture stores only partially offset a big drop in auto sales, the government said Wednesday.

The Commerce Department said sales totaled a seasonally adjusted $118.7 billion last month following a 0.1% decline in June.

While the monthly increases in retail sales have been somewhat lackluster this year, consumer spending has been one of the few bright spots of the economy.

Economists explain the discrepancy by noting that the retail sales figures are reported without discounting for price changes. Since consumer prices have been declining for much of this year, this has made sales look weaker.

The small July advance was in line with expectations of many analysts, who had been looking for a sluggish report because auto sales were weak for the month.

Sales at auto dealers fell 1.7%, the steepest drop since March. Without this weakness, overall retail sales would have advanced by 0.6%, the best performance in the non-auto category since February.

“If you look beyond cars, consumer spending is still holding up,” said Sandra Shaber, consumer economist for Chase Econometrics, a private forecasting firm. She predicted that the pattern of sluggish auto sales balanced against strength in appliance and home furnishing sales will continue in coming months.

Commerce Secretary Malcolm Baldrige, however, predicted that auto sales will rebound in response to renewed dealer incentives and that this increase will bolster overall spending gains.

Jeff Shapiro, an economist with Wharton Econometrics, also was optimistic about retail sales in coming months. He predicted that consumers will soon begin to spend the savings that they have achieved from dramatically lower energy bills.

“Consumers are optimistic about their current state of financial affairs and the state of the economy, and that always helps to boost retail sales,” he said.

Shapiro predicted that the economy, as measured by the gross national product, will expand at a 3.2% annual rate in the final six months of this year. While this would be up sharply from the sluggish 2.4% rate of expansion from January through June, it would be below the 4% growth being forecast by the Reagan Administration.

Part of the problem is that while consumers have been spending, much of those outlays has bought imported goods rather than domestically manufactured products. The Administration is forecasting that the huge foreign trade deficit will begin improving in the second half of the year, but private forecasters are more doubtful.

Sales of durable goods, items expected to last three or more years, fell 0.1% in July. The weakness came from the decline in auto sales.

Two categories tied to the booming housing sales market showed strength during the month. Sales at furniture stores rose a solid 1.6%, and sales at hardware and building supply stores were up 2.9%.

Sales of non-durable goods were up 0.2% in July with department stores posting a 0.6% gain and sales at grocery stores rising 0.8%. Analysts said part of the increase at grocery stores came from a jump in food costs last month.

Sales at restaurants and bars fell 0.5% in July after posting a 0.1% decline in June, while sales at gasoline stations were down a sharp 2.6%, reflecting the continued declines in gasoline prices.