Autos Drive Down Retail Sales
WASHINGTON (Feb. 13) - Sales at the nation's retailers dropped by 0.9 percent in January, largely reflecting a sharp decline in car and truck sales as consumers took a breather after going on an automobile shopping spree.
The Commerce Department reported Thursday that the 0.9 percent over-the-month decline in retail sales followed a 2 percent rise in December. That represented the biggest drop in four months and a weaker performance than the 0.6 percent drop that analysts were predicting.
But excluding automobile sales, which can swing widely from month to month, retail sales actually rose by 1.3 percent in January, the biggest gain since September 2000. That marked an improvement over the small 0.2 percent advance in December and much stronger than the 0.5 percent rise economists were expecting.
That provided encouraging news; other than the big drop in automobile sales, which was expected, consumers - the main force keeping the economy going - showed considerable energy in January.
Separately, the Labor Department reported that new claims for unemployment benefits last week dropped by 18,000 to 377,000, a four-week low. The report suggested that the pace of layoffs is stabilizing, welcome news for workers worried about keeping their jobs.
Sales at automobile dealers declined by 7.5 percent in January, the biggest drop since November 2001, as consumers became tapped out after a buying binge in December, when auto sales jumped 7.9 percent.
That was the major weak spot in Thursday's retail report.
Sales at building and garden supply stores rose 2.9 percent in January, following a 1.2 percent decline.
At department and other general merchandise stores, sales rose 0.6 percent, up from a 0.4 percent increase.
At health and beauty stores, sales went up 1.1 percent, better than the 0.2 percent decrease in December.
Sales of sporting goods, books and music rose 0.3 percent in January, a turnaround from the 0.9 percent drop the month before.
Food and beverage stores saw sales rise 2.6 percent last month, following a 1.3 percent decline.
At bars and restaurants, sales rose 1.1 percent, down from a 2 percent advance.
The Federal Reserve last month decided to leave a key interest rate at a 41-year low of 1.25 percent, with the hope that will encourage consumers and businesses to spend and invest more and help along the recovery.
One of the main forces holding back the recovery is the wariness of businesses to make big commitments in hiring and in capital spending, given worries about a possible war with Iraq, tensions with North Korea and other economic uncertainties.
Fed Chairman Alan Greenspan told Congress this week that he was hopeful that once such ''geopolitical'' uncertainties lift businesses would be much more willing to step up capital investment and hiring, forces that would boost economic growth.
Against that backdrop, Greenspan said that President Bush's new 10-year, $1.3 trillion tax-cut package isn't needed right now to stimulate the economy, dealing a blow to the president's efforts to sell the plan to Congress.
In the face of projections for record high federal budget deficits this year and next, Greenspan also said that any new tax cuts should be paid for by either raising other taxes or cutting spending, a position that clashes with the administration's.
Greenspan said that if geopolitical uncertainties do lift and businesses remain reluctant to quicken their operating pace - which would signal a deeper problem within the economy - then other monetary or fiscal policy actions may be warranted.
AP-NY-02-13-03 0851EST
Copyright 2003 The Associated Press. |
