Demand for Cars Helps Offset Sharp Decline in Retail Sales : Economy: Signs of slowing in fourth quarter may foreshadow a weak holiday season.
A sharp drop in sales at department stores and other retailers more than offset a rebound in new car sales last month, the government said Tuesday, in a sign of a weak holiday shopping season ahead.
Total retail sales fell 0.2% to $197.2 billion in October, the Commerce Department said, after a scant 0.1% rise in September. Sales would have fallen more sharply were it not for a rise in new car sales, which account for about a quarter of total retail sales.
The report is the latest sign that the economy is slowing from the rapid growth of the third quarter, analysts said.
In addition, last month’s weak sales, particularly at department and clothing stores, was not an auspicious start to the holiday shopping season, they said. While stores used to wait for Thanksgiving to start holiday promotions, the season now starts earlier.
“Clearly, the consumer is not a ball of fire here and will not push the economy ahead in the fourth quarter at all,” said economist John Williams of Bankers Trust Co. in New York.
Still, the report was unlikely to sway Federal Reserve policy-makers into cutting interest rates when they meet today, analysts said.
The central bank policy-makers are expected to wait for more evidence about the economy and the outcome of the budget battle between President Clinton and Congress, analysts said. They cut rates in July for the first time in nearly three years in a bid to spur the economy from second-quarter weakness.
“They’re still looking at a fairly robust economy, one that is slowing but that is still clearly on a growth track,” said economist Gene Sherman at M.A. Schapiro & Co. in New York. “They won’t risk their success in dampening inflation by over-stimulating an economy that doesn’t need stimulation.”
The report of weak retail sales came as J.C. Penney Co. and Dayton Hudson Corp., two of the nation’s five largest retailers, said earnings fell in the fiscal third quarter as too many stores battled for customers reluctant to spend.
Even Wal-Mart Stores Inc., the nation’s largest and strongest retailer, wasn’t immune to the industry’s ills: It posted its smallest earnings gain in at least five years.
Results weren’t much better at specialty retailers. The Limited Inc.’s profit from operations fell by more than half because of slow sales of women’s apparel, and Woolworth Corp.’s net income fell 8.1% on slow consumer spending and markdowns.
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
Retail Sales
Seasonally adjusted, in billions of dollars:
Oct. 1995: 197.2
Source: Commerce Department
