Retail Sales Fall on Worst Auto Sales in 3 Years

The biggest fall in auto sales in more than three years pulled retail sales down 0.9% in February, after a revised 2.8% gain in January, the Commerce Department reported Tuesday.

“The 0.9% decline is very deceptive,” said Sandra Shaber, an economist with the Futures Group here. “It’s all cars, virtually. Consumer spending (elsewhere) is holding up pretty well.”

“True, automobile sales fell,” agreed William K. MacReynolds, forecasting director for the U.S. Chamber of Commerce, “but almost all other sectors experienced nice increases.”

Excluding automobiles, retail sales actually rose 0.5%.

The department said retail sales totaled a seasonally adjusted $146.5 billion. The decline was the biggest since a 1.3% drop in October and followed a strong 2.8% gain in January. The January number had originally been reported as up 1.6%.

Automobile sales fell 6.0% in February after jumping 9.9% in January, when sales incentives were restored. It was the biggest drop since auto sales fell 26.5% in January, 1987.

Sales of new cars fell in February to an annual rate of about 9.5 million units from 10.1 million in January.

“Clearly, selling autos is tough these days,” said Allen Sinai, chief economist with Boston Co. “But other than autos, the retail sales numbers are up solidly. It’s a sign that households are alive and well and spending nicely.”

Consumer spending is the main engine of growth in the United States, accounting for about two-thirds of economic activity. Economists said there are promising indications that spending strength will be sustained.

John Silvia, an economist with Kemper Financial Services in Chicago, said the non-auto spending, combined with the substantial upward January revision, suggests that consumer spending is going to be fairly strong in the first quarter.

RETAIL SALES

Seasonally adjusted, billions of dollars.

Feb.,’90: $146.5. Jan.,’90: 147.9. Feb.,’89: 139.4.

Source: Commerce Department