1989 Retail Sales Up 5%, Smallest Gain in 7 Years

Retail sales, reflecting a sluggish economy, rose just 5% in 1989, the smallest gain in seven years, the government said today.

The Commerce Department said sales for all of 1989 totaled $1.71 trillion, down from 1988’s 7.1% gain. It was the smallest advance since a 2.9% increase in 1982.

The economy was pinched through much of last year by high interest rates caused by the Federal Reserve’s tight credit policies designed to contain inflation.

Retail sales account for about one-third of the nation’s economic activity and thus are one barometer of the extent to which the Fed’s anti-inflation policies have slowed the economy.

The Commerce Department said retail sales rose 0.2% in December to a seasonally adjusted $144.4 billion after rising 0.5% in November.

Part of the November increase was attributed by analysts to the early start of Christmas shopping during the weekend after Thanksgiving and raised expectations of many merchants and analysts.

But the December sales turned out to be modest, and the Department of Commerce said spending during the November-December period rose only 3.8% over the same period in 1988, when sales were up 6.6% over the previous two-month period. It was the lowest November-December gain since sales rose 2.9% in 1985.

Half or more of retail profits come from business done between Thanksgiving and Christmas.

Sales of durable goods--big-ticket items such as cars and household appliances expected to last more than three years--fell 0.6% after edging up 0.1% in November.

Durable goods, which often are financed by loans and thus are susceptible to interest rates, have been hit hardest by Fed policies.

Auto sales, which have been in the doldrums, fell 0.7% in December after a 0.4% decline in November. Auto sales finished the year up just 2.2% contrasted with a 10.3% gain in 1988. It was the lowest since sales declined 8.1% in 1980.

Excluding autos, overall sales in December were up 0.4%.

Among other durable sales, building materials rose 0.1% on top of a 0.7% rise in November, while furniture and other home furnishings declined 1% after a 0.7% increase a month earlier.

Sales of non-durable goods rose 0.6% after gaining 0.8% in November.

Gains were posted in grocery stores, up 0.6%, and gasoline stations, up 1.3%, due in part to higher prices. Apparel sales advanced 0.1%.

Declines were posted in department store sales, down 0.4%; restaurants and bars, down 0.9%, and drug stores, down 1%.

For the three months from October through December, overall retail sales were up 3.6%.