Retail Sales Edge Up, Signaling Slower Growth
U.S. retail sales rose modestly in January from December results that were much weaker than previously thought, the government said Thursday, pointing to slower economic growth early in 1997.
Sales rose 0.6% last month to a seasonally adjusted $209.1 billion after a revised 0.3% gain in December, the Commerce Department said. The department previously said December sales had risen 0.6%.
A separate report from the Labor Department showed a sharp drop in new jobless claims last week, a sign of underlying strength in the job market despite what appeared to be a slowing economy.
Analysts said the figures implied moderate economic growth in early 1997 after a surge in the fourth quarter, which means the Federal Reserve Board will probably hold interest rates steady rather than raising them in a bid to ward off inflation.
“These numbers will tend to keep the Fed on the fence awhile longer,” said economist Ken Mayland of KeyCorp, in Cleveland. He said that consumers burdened by high debt loads may be trimming back on spending.
The news caused bonds and stocks to rally. The Dow Jones industrial average rose more than 60 points--crossing the 7,000 mark for the first time--to close at 7,022.44. Bond yields fell to their lowest levels since January.
Some analysts and investors have said the Fed, the nation’s central bank, may still raise short-term rates later this year if there are signs of a pickup in inflation.
In its report, the Labor Department said first-time applications for unemployment benefits fell 15,000 to 309,000 last week, the lowest level since the week ended last July 27, when claims stood at 294,000.
Economist Sam Kahan of ASK Financial Research Ltd. in Chicago said the retail sales and jobless figures suggested that the economy was slowing but remained well-supported by job creation that has kept incomes growing.
He said gross domestic product, the broadest measure of the nation’s economy, probably grew more slowly than the robust 4.7% rate the government estimated last month and that growth will probably slow to about a 2.5% rate in the current quarter.
“But as long as consumer spending grows, even modestly, that’s a good firm underpinning for the economy,” Kahan said. The economy is set to complete its sixth year of uninterrupted growth after the last recession, which ended in March 1991.
January sales excluding automobiles, which account for about a quarter of all retail sales, rose 0.4% after being flat in December.
The Commerce Department’s undersecretary for economic affairs, Everett Ehrlich, said first-quarter growth in consumer spending, which accounts for two-thirds of economic activity, will slow from the fourth quarter.
Sales of durable goods such as cars and refrigerators rose 0.7% in January after a 0.2% gain in December. Sales of nondurables such as food and gasoline grew 0.5% after a 0.3% December gain.
Sales at general-merchandise stores rose 1.3% after a 0.8% gain in December. But sales at clothing stores fell 0.9% following a 0.4% December rise.
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Retail Sales
Total sales, in billions of dollars, seasonally adjusted:
January 1997: 209.1
Source: Commerce Department
