Retail Sales Up 0.5%; First Rise in Five Months

A big burst in department store sales last month helped push retail sales up 0.5%, the first increase since January, the Commerce Department reported Friday.

“It’s a welcome sign for a beleaguered sector of the economy. . . . It offers a good deal of hope that the economy will keep on expanding,” said Allen Sinai, chief economist at the Boston Co.

Other analysts, however, cautioned against reading too much into the turnaround. They noted that the June increase followed three months of declines in retail sales--a period of weakness unseen since 1981.

“The question is whether it’s a one-time reversal of a string of weakness or the start of something new,” Sinai said.

Retail sales rose to a seasonally adjusted $147.82 billion last month, up $784 million from May, the Commerce Department said.

Since consumer spending accounts for two-thirds of economic activity, prolonged weakness in this area raises fears that the economy could be headed for a downturn.

June’s gain in retail sales was probably due, in part, to consumers making up for lost ground in April and May, analysts said.

Cooler temperatures in May probably resulted in Americans holding off on buying summer clothing, air conditioning and other seasonal items, analysts said. They probably made those purchases in June when the weather warmed up, analysts said.

David Wyss of DRI-McGraw Hill called the June increase “just a rebound from the softness we saw in May.”

“We’re up only 2.4% from a year ago. That’s not even keeping up with inflation,” Wyss said.

Americans continue to demonstrate signs of cautious spending, said Robert Dederick, chief economist at Northern Trust Co. of Chicago.

“The consumer did not turn tail in the spring, but nonetheless is behaving in a rather restrained way,” Dederick said.

The 0.5% increase in June was the first rise since a big 2.8% jump in January. After that gain, retail sales showed no change in February and then fell 0.4% in March, 1% in April and 0.6% in May.

RETAIL SALES Seasonally adjusted, billions of dollars June, ‘90: $147.8 May, ‘90: $147.0 June, ‘89: $144.4 Source: Commerce Department