Retail sales dip by 0.2 percent in January, reflecting drop in car sales; other areas gain

Posted 9:28AM on Wednesday 13th February 2002 ( 22 years ago )

WASHINGTON - A drop in car sales, reflecting the waning of free-financing offers, pushed down sales at the nation's retailers by 0.2 percent in January. But consumers didn't close their wallets and pocketbooks last month. They spent on a wide range of items from clothing to building and garden supplies, the Commerce Department said Wednesday. Excluding volatile automobile sales, overall retail sales rose by a solid 1.2 percent in January. Consumer spending, which accounts for two-thirds of all economic activity in the United States, has held up relatively well even as the country has suffered through a recession that began in March, economists say. Consumer confidence, as measured by the Conference Board, rose in January for the second straight month, a sign that consumers probably won't drastically reduce spending. A reduction would be a setback for the economy as it struggles to come out of the downturn. After cutting short-term interest rates 11 times last year, the Federal Reserve last month cited signs of an economic rebound in deciding against another cut. The Fed's actions had the effect of pushing the prime lending rate -- a benchmark for many consumer and business loans -- down to its lowest point since late 1965. The 0.2 percent dip in retail sales in January followed a 0.2 percent increase in December. But virtually all the weakness last month came from auto sales, which fell by 4.3 percent as zero-interest-rate financing and other incentives waned. That came on top of a 1.1 percent decline in December. Another weak spot was sales of electronics and appliances, which fell by a record 3.6 percent in January, after rising by 2.1 percent the month before. But many other retailers posted gains. Sales at building and garden supply stores rose by 2.9 percent in January, after registering a 1.3 percent decline in December. At clothing stores, sales increased by 2.5 percent as retailers discounted winter merchandise. That followed a 2.7 percent gain. General merchandise stores, including department stores, saw sales rise by 2.1 percent last month, following a 1 percent advance. Sales at sporting goods, hobby shops and music stores went up by 0.8 percent, after falling by 2.2 percent. Sales of health and beauty items rose by 2.3 percent, following a 0.7 percent drop. At furniture and home furnishing stores, sales rose by 0.4 percent after a 1 percent rise. Sales at gasoline stations rose by 5.1 percent, after falling by 3.2 percent. Even if the economy recovers in the second half of this year as many analysts are predicting, it will take longer for many laid-off workers to see relief. The nation's unemployment rate, considered a lagging economic indicator, now stands at 5.6 percent and is expected to rise in the months ahead because companies, battered by the slowdown, will be reluctant to hire back workers, economists say. Some economists are concerned about whether consumers will continue to spend amid a worsening jobs picture. Fed policy-makers say they will keep a close eye on how consumers react with their wallets and pocketbooks. Last week, the nation's largest retailers reported that deep discounting of winter merchandise lured shoppers into stores in January, offering struggling retailers a brief respite from a sluggish sales trend. Wal-Mart, wholesale clubs and other moderate-price stores outperformed the rest of the retail industry during January.

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