Retail Sales Rise by a Scant 0.4% in April

Retail sales rose by a lackluster 0.4% in April, the government said Thursday in a report that analysts cited as evidence that rising interest rates are taking a toll on economic growth.

The Commerce Department said sales climbed to a seasonally adjusted $139.9 billion last month after remaining flat in March and falling 0.4% in February.

“The last three months’ sales were up 5% over the same period last year, barely keeping pace with inflation,” said economist Lawrence A. Hunter of the U.S. Chamber of Commerce. “Today’s report is another clear sign that the economy has slowed far more than most analysts realize.”

Economists had expected a much stronger rebound in April. They had looked for a surge of 1% to 2% on the strength of spring auto sales.

Car buying increased for the first time since November, with sales up 1.1%, but the April gain was only about half of what was predicted.

Auto sales have been hit particularly hard by the Federal Reserve’s strategy of pushing up interest rates to dampen inflation, as have housing-related items such as hardware, building supplies and furniture.

“What the Fed was hoping for was to cool off consumer spending while we still had an expansion led by (business investment) spending and exports, and it looks like it’s going the Fed’s way,” said economist David Jones of Aubrey G. Lanston & Co., a government securities dealer.

Bond prices, which tend to rise as interest rates fall, rose slightly in trading after the release of the sales report.

Still, Jones and other analysts said that retail spending is not so weak as to lead to a recession. Retail spending accounts for about a third of economic activity and is closely watched as an indicator of overall growth.

Excluding automobiles, sales rose by a sluggish 0.2% last month after inching up 0.1% in March and falling 0.1% in February.

“I don’t see a recession in these numbers,” said economist Rosalind Wells of the National Retail Merchants Assn. “I think the economy is slowing, but only in selected areas.”

The bright spots in the report were sales at department stores and specialty clothing shops, which were buoyed by a long-awaited rebound in women’s clothing.

Purchases at general merchandise and department stores were up 1%, following a 0.1% gain in March. Clothing stores reported a large 3.6% gain after a 0.5% drop in March. April’s was the biggest jump since February, 1987.

“They must be jumping up and down and breaking out champagne bottles,” said economist Sandra Shaber of the Futures Group, a Washington consulting firm. “That industry has been depressed for so long.”

Shaber said women’s apparel appears to be recovering from a two-year slump caused by rising prices for imported goods and the merchandisers’ failure to offer styles appropriate for women to wear to work.

Sales of durable goods, “big ticket” items expected to last three years or longer, rose only 0.1% in April after falling 0.9% in March. Sales of non-durable goods, meanwhile, rose 0.6% following a 0.5% rise.

Other sales categories in which increases were reported for April were gasoline stations, 2.2%, and food and grocery stores, 0.7%.

Michael K. Evans, an economic consultant in Washington, said the higher gasoline figure was due to increased prices.

Categories that showed declines included building supply and hardware stores, 0.5%; furniture stores, 1.2%; bars and restaurants, 0.9%, and drugstores, 1.6%.