Retail Sales Rise 0.8% in July; Auto Rebound Big Help
Retail sales rose 0.8% in July, following an even stronger June increase, as consumers returned to auto showrooms and department and furniture stores, the government reported Thursday.
The Commerce Department said retail establishments sold $127.6 billion worth of goods in July, a rise of $954 million from the June level, when sales had shot up an even faster 1.4%.
While half of the July gain and two-thirds of the June increase came from a rebound in auto sales, many analysts said the back-to-back increases were still impressive following several months of lackluster performance.
“Consumers are overcoming their earlier lethargy and are starting to spend again,” said Allen Sinai, chief economist of Shearson Lehman Bros. in New York. “The notion that the consumer might fizzle out has been dashed by these numbers.”
Sinai said the increased consumer spending was being fueled by rebounds in the country’s industrial sector, where production and employment have been rising in recent months. He said the drop in the unemployment rate to 6% in July, the lowest level in eight years, meant more jobs and higher incomes.
“The economy seems to be in the best shape and showing the best balance than at any time since early 1984,” he said.
Other economists, however, said the spending gains were puzzling because income growth still is not keeping up with inflation, and consumer debt burdens remain at high levels.
“When you look at the income numbers, you have to wonder what consumers are spending,” said Bruce Steinberg, an economist with Merrill Lynch. “Consumer incomes, their savings rate and level of debt are still negative factors.”
Michael Evans, a Washington consultant, said that consumer spending, excluding cars, rose at a rate just below the increase in inflation over the past three months, indicating that higher prices were driving up the numbers rather than increased consumption.
A separate report by the National Assn. of Realtors showed that sales of existing homes in the April-June quarter posted a 5.6% increase over a year ago. The association’s report also showed that the national median price for the second quarter was $85,700, meaning half of the nation’s homes cost less and half cost more. The median was 4.5% higher than the $82,000 reported in the second quarter of 1986.
The New York-Northern New Jersey-Long Island area led all metropolitan areas with a median price of $183,000, followed by Boston, with $175,000; Orange County, with $167,300; Hartford, Conn., at $157,000, and Los Angeles at $139,600.
