September Retail Sales Jump a Record 4.6%
Retail sales, led by a stampede to auto showrooms, rose 4.6% in September for the largest monthly increase on record, the government reported Wednesday.
But economists cautioned that the spending spree was likely to cool substantially in coming months as overextended Americans begin to cut back on purchases. One analyst predicted that this would mean a third consecutive year of pre-Christmas price-cutting by department stores anxious to trim high inventories.
The Commerce Department said total retail sales, after adjusting for seasonal variations, climbed to a record $127.2 billion last month following a revised 1.5% increase in August. They were up 7.5% from September, 1985.
Sales of new cars jumped 19.5% during the month, their biggest increase since January, 1971, as consumers flocked to showrooms to take advantage of cut-rate financing deals being offered to clear out high inventories of unsold 1986 models.
Without the strong demand for new cars, retail sales would have risen a tiny 0.1%.
Commerce Secretary Malcolm Baldrige noted that retail sales climbed an “unusually strong” 15.7% in the July-September quarter and said they should post further gains in coming months even if auto sales do slip.
But many private analysts said the non-auto sales more clearly reflected consumer demand and showed that consumer spending, long the driving force behind the recovery, will not show much strength in coming months.
“For the rest of the year we are looking for consumer spending to exhibit much slower growth,” said Sandra Shaber, head of consumer economics at Chase Econometrics of Bala Cynwyd, Pa. “Retailers have grounds to worry about all of those people who are now making car installment payments and mortgage payments.”
Shaber forecast a rather lackluster Christmas sales season for retailers. In a continuation of the pattern of the past two years, she predicted that department stores will be forced to slash prices before the holiday in order to spur lagging sales.
Car and home sales have been two big areas of strength in the economy this year, but economists said the added debt burden will make Americans leery about adding to their consumer debt--already at record levels.
“We have seen the high point for consumer sales this year,” said Tom Megan, economist with Evans Economics, a Washington forecasting firm. “As the financial incentive programs end, auto sales will be weaker this fall and early next year.”
Maury Harris, chief economist of Paine Webber, noted that non-auto sales for August were revised to show greater strength than originally thought. He said August and September, viewed together, show “a respectable increase.”
“I think consumer spending will be decent in November and December but more moderate than it has been,” he said.
The 4.6% overall sales increase in September was the sharpest one-month gain in nearly 20 years of government record-keeping, topping the old mark of a 4% rise in May, 1975.
While car purchases soared, sales at department stores fell 1.4% in September after a 1.6% August gain.
Analysts said part of this weakness reflected unseasonably warm weather at the end of the month, which discouraged the sale of fall merchandise, and the fact that much of the back-to-school sales occurred in August this year rather than early September.
Sales in the durable goods category, which includes autos, climbed 11.9% in September. Sales at hardware stores were up 1.3%, while those at furniture stores climbed 1.4%. The jump at furniture stores reflected strong home sales in recent months, analysts said.
Sales of non-durable goods, items not expected to last three years, were down 0.1% in September.
In addition to the weakness at department stores, sales at specialty clothing stores dropped 0.6%.
The declines were offset somewhat by increases of 0.7% at grocery stores, 0.4% at service stations and 1% at restaurants and bars.
