Paced by Autos, Retail Sales Fall Record 5.8%

Auto sales plunged a record 22.4% last month, dragging the nation’s total retail sales down by a record 5.8%, the government reported Thursday.

The Commerce Department said January retail sales totaled a seasonally adjusted $119.3 billion. That included $25 billion in auto sales--down from $32.2 billion in December.

The overall monthly decline was the sharpest since at least 1967, when the department started reporting the figures in the present format. The auto plunge, which surpassed last October’s record skid of 19.5%, controlled the figures. Excluding autos, retail sales were off only 0.1%.

A drop in auto sales had been anticipated because of the new tax code that took effect Jan. 1. The new law ended the sales tax deduction, and thousands of consumers who would have bought cars or furniture early this year apparently bought in December instead to take advantage of the old law.

Because of that, the Reagan Administration and private economists said the January figures were not as grim as they appeared.

White House spokesman Marlin Fitzwater, citing the “erratic car sales” of recent months, said January’s record drop showed no fundamental problem with the economy.

“Virtually all of the economy’s vital signs point to a healthy 1987,” Fitzwater said. “Last month’s addition of 372,000 new jobs and a steady rise in industrial production indicate continued prosperity under the Reagan expansion.”

Independent economists agreed that the January figure was an aberration, but differed on how promising the underlying figures appear.

“Obviously, the figures are not as bad as they seem at face value,” said Michael K. Evans of Evans Economics in Washington. With autos excluded, he said, “it’s not a disaster.”

David Wyss, chief financial economist for Data Resources Inc. of Lexington, Mass., contended that the underlying economic situation “is actually good.”

“The big discretionary items”--clothing, restaurant and department store sales--”were all pretty strong,” Wyss said. “That suggests that the consumer was still willing to buy. We’re not seeing any backing away.”

But Lawrence Chimerine, president of Chase Econometrics in Bala Cynwyd, Pa., said the sales figures excluding autos show a squeeze on consumer purchasing power and a burdensome consumer debt that will drag on the economy’s growth for months to come.

“If you average out retail sales over the last six months, you’ll find we’ve moved into a period of much slower growth in consumer spending,” Chimerine said. Such growth may be enough to keep recession at bay, he said, but will deter any vigorous economic expansion.

Although retail sales were down sharply from December, the total showed a 1.7% increase from sales in January, 1986, the department said. Auto sales were 5.3% below January, 1986, levels.

The new auto figure also pulled down durable goods sales, which registered a 14.1% decline for the month.

Except for autos, however, there was little change from December for durable goods. Building materials and hardware stores reported that sales were up 0.5%, while furniture and home furnishings stores recorded a 0.9% sales decline.