Auto Purchases Fuel 0.7% Rise in Retail Sales

Retail sales rose a moderate 0.7% in August because of strong automobile sales, the government reported Thursday, but analysts foresee growing sluggishness in the remainder of the year.

The Commerce Department said sales increased to a seasonally adjusted $144.3 billion in August after a 0.5% gain in July. Sales had remained flat in June after rising 0.8% in May.

Analysts said the report was consistent with the so-called soft-landing scenario sought by the Federal Reserve as it moves to keep inflation under control while permitting continued, but slower, economic growth.

At the White House, press secretary Marlin Fitzwater said the August figure was “an indication of continued but slow growth in the current economic expansion, which is now in its 82nd month, so it’s good news.”

Auto sales, which represent about 20% of retail sales, advanced 2.6% last month, driven by end-of-model-year sales incentives and the threat of steep price increases for 1990 models. Those sales had risen 1.7% in July.

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But Michael K. Evans of Evans Economics Inc., a Washington consulting firm, said: “Auto sales have peaked. They came in low (in early September). October will be way down. So total retail sales will be down.”

“I think we will see a decided weakness in auto spending in the fourth quarter,” agreed Allen Sinai, chief economist of Boston Co.

Excluding the automobile category, retail sales edged up only 0.2% in August.

Sales of durable goods, big-ticket items including autos that are expected to last more than three years, rose 2.4% on top of an 0.8% gain in July. On the other hand, sales of non-durable goods fell 0.4% after rising 0.4% a month earlier.

In the durable goods category, building materials advanced 2.2%, and furniture and other home furnishing sales gained 1.6%, reflecting in part, analysts said, both increased home sales and remodeling.

The only advances in the non-durable goods category were apparel sales, up 1.1% in part because of back-to-school clothes shopping, and drugstores, up 1.4%.

But general merchandise sales, including department stores, did not benefit as much from the back-to-school spending, analysts said, and fell 0.9%.

Other declines in the non-durable categories included food stores, down 0.2%; service stations, down 1.5%, reflecting falling gasoline prices, and restaurants and bars, down 1%.

For the three months from June through August, overall retail sales were up 5.8% over the same period in 1988. Retail sales so far in 1989 were 5.9% above those in the first eight months of 1988.