April Retail Sales Rose Sluggish 0.1% : Report Cites Slow Auto, Department Store Performance

Retail sales rose a sluggish 0.1% in May, held down by a big decline in department store revenues and a slowdown in movement of automobiles off dealer lots, the government reported today.

The Commerce Department said sales climbed to a seasonally adjusted $141.1 billion last month after rising 1% in April. The April figure had been revised upward from 0.4%. Sales had fallen 0.4% in February and risen 0.1% in March.

Economists had anticipated a weak sales increase of about 0.2% in May. Major retailers reported sluggish sales that month as interest rates remained near their early-spring peak.

“If you’re hoping that we will achieve a soft landing, it’s a good sign,” said Cynthia Latta, senior financial economist for the DRI-McGraw Hill forecasting firm in Lexington, Mass. “You’re getting slow growth, which is what we want for a while in order to take the pressure off prices.”

Fed Effort

The Federal Reserve Board paused recently in its efforts to push rates up to slow the economy and dampen inflation, and rates have begun to fall slightly.

Auto sales slowed to a 0.2% rise in May after a strong 2% rise in April. In both months, auto makers had offered incentives such as rebates and low-interest rates to lure buyers into showrooms.

Auto sales in the first five months of 1989 were 2.3% higher than during the same period last year. That was less than the rate of inflation.

Autos represent about 20% of retail sales.

Excluding the automotive category, sales rose 0.1% after a hike of 0.7% in April and a 0.1% decrease in March.

Department and other general merchandise stores and specialty clothing shops accounted for much of the slower sales pace. Sales of general merchandise fell 1.2% and clothing shops dropped 1.4%.

Sales of durable goods, “big ticket” items expected to last more than three years, rose 0.3% after rising 1.8% in April, largely on the strength of auto sales.

Sales of non-durable goods were flat after an increase of 0.6% in April.

The following categories also reported sales increases in May: food and grocery stores, 0.5%; gasoline stations, 0.9%, and drug stores, 1.8%.

Categories posting declines included bars and restaurants, down 0.4%. Building materials and furniture sales were flat.

For the three months from March through May, overall retail sales were up 5.1% from the same period in 1988.