December Retail Sales Leap; Auto, Holiday Buying Cited

Retail sales surged 4.4% in December, the government reported Wednesday, propelled by late Christmas shoppers and by car buyers rushing to claim sales tax deductions for the last time.

The December increase, led by a 16.2% gain in auto sales, was the biggest for one month since a record 5.6% jump in September. Sales in December totaled $126.26 billion after adjustment for seasonal variations, compared to $120.94 billion in November.

Despite the big year-end finish, total retail sales of $1.44 trillion for 1986 were up only 5.2%, the smallest annual gain since a 3% rise in the recession year of 1982, the Commerce Department said. Sales had increased 6.3% in 1985.

At the White House, spokesman Larry Speakes said the report “helps complete an economic picture of an extraordinarily strong December. Unemployment dropped to its lowest point since March, 1980 . . . and inflation at the wholesale level was stopped dead in its tracks.

“The strong close for 1986 obviously means 1987 will be yet another year of growth for the American economy.”

Private economic analysts were skeptical, however. They noted that many consumers were buying big-ticket items in December, when sales tax was deductible, instead of January, when the new tax law made it non-deductible.

“I wouldn’t call it bad news, but it’s no reason to get excited,” Michael K. Evans of Evans Economics Inc. said of the December sales report.

Evans and others pointed to two important figures--auto sales and department store sales--as tempering factors.

“A lot of December sales were borrowed from January and perhaps beyond,” Lawrence Chimerine, president of Chase Econometrics, said of the auto sales. “It’s a matter of shifting spending around. . . . We’re already seeing a sharp falloff offsetting a large part of the December increase.”

The tip of that expected decline appeared in reports issued in Detroit on Wednesday by the top three U.S. auto makers. They said domestic car sales fell 38.7% in the first 10 days of January, compared to the same period a year ago.

“Everybody and his brother went out and bought a car to take the sales tax deduction,” Evans said. “We’re going to look for a real bum number in January.”

Poor November Sales

And, department store sales were poor in November, leading to a December surge by Christmas shoppers who would ordinarily have bought presents around Thanksgiving.

Evans noted that the government’s figures for sales by general merchandisers in November were revised sharply downward.