Retail Sales Record Strong 1988 Growth : Increase Marred by Sluggish December for Department Stores, Car Dealerships

Retail sales grew in 1988 at their strongest pace in four years, the government said today, but the year went out with a whimper of weak holiday sales at department stores and car dealerships.

Sales totaled $1.61 trillion for the year, up 6.7% from 1987 and the largest annual increase since a 9.8% gain in 1984, the Commerce Department said.

Despite rosy expectations for strong year-end sales by retailers and car dealers, however, December sales were up just 0.2% from the previous month to a seasonally adjusted $138 billion.

December’s gain was the slowest since a 0.3% drop in September that was followed by a revised 1.7% increase in October and a 0.9% rise in November. The figures are not adjusted to exclude the effects of rising prices.

Economist David Wyss of Data Resources Inc. in Lexington, Mass., said that although the overall sales figure for 1988 turned out to be “a lot better than we feared it was going to be after the stock market crash” in October, 1987, December’s numbers were unexpectedly low.

“It suggests that we’re entering 1989 with a lot less momentum than we thought we had,” Wyss said. “I wouldn’t call it a worry yet, but it does suggest that the economy is going to be slowing down in 1989.”

Jay Levy of Levy Economic Forecasts in Chappaqua, N.Y., said the report shows that consumers “have moved toward caution” after a period of more buoyant spending.

The bond market rallied in early action today as traders read the sales figures as a sign of a slowing economy that would place less upward pressure on interest rates.

Some economists were skeptical about the implications of the report, however, saying December’s weak numbers might later be revised upward and that they might not reflect strong sales late in the month, particularly of automobiles.

“All I know is that auto companies were well satisfied with what they saw and the general merchandisers were well satisfied,” said Robert Dederick of Northern Trust Co. in Chicago.

Sandra Shaber of the Futures Group in Washington said that although retail sales were not as strong as expected for December, spending still showed modest growth that should continue into the new year.