Renewed Car Rebates Help Drive Up Retail Sales 1.6% in January

Retail sales driven by renewed automobile sales incentives climbed 1.6% in January, the steepest increase in more than a year, the government reported today.

The Commerce Department said sales increased to a seasonally adjusted $146.4 billion after declining a revised 0.2% in December during what analysts described as modest holiday shopping.

The January gain was the sharpest since a 2.1% advance in October, 1988.

“Consumer spending is still alive,” said John Silvia, an economist with Kemper Financial Services in Chicago. Most categories showed advances that “suggest to me that the consumer is coming back in the first quarter, taking up his normal pace of spending.”

December sales originally had been reported to have gained 0.2%. A drop in estimated auto sales accounted for the decline. Overall sales in November rose 0.7%.

Retailing usually slows in January because of the previous month’s activity. Half or more of retail profits come from business between Thanksgiving and Christmas.

Retail sales account for about one-third of the nation’s economic activity and thus are a barometer of economic growth. The economy, particularly the construction and manufacturing sectors, has been squeezed by high interest rates as the Federal Reserve kept a tight rein on credit to cap inflation.

The automobile industry, slowed by the high rates and rising prices on 1990 models, reinstituted rebates on many models last month to lure buyers to dealer showrooms.

Commerce said auto sales gained 5.4% in January after falling 2.6% in December. It was the largest advance since a 6.6% increase in October, 1988. Autos represent about 20% of retail sales.

Excluding autos, retail sales for the month would have risen 0.6%.

The overall durable goods category--including cars and other big-ticket items expected to last more than three years--gained 3.9% after declining 2.1% in December.

Building materials advanced 2.3%, while furniture and other home furnishings rose 2%.

Sales of non-durable goods such as food and clothing edged up 0.3%.