Retail Sales Down in January, Ex-Autos Strong

A steep decline in new-car buying depressed sales at the nation's retailers by 0.3 percent last month, although consumers continued spending heartily in less expensive ways.

The overall decline — the first since September — was reported by the Commerce Department (search) Thursday. It largely reflected a sharp drop in sales of automobiles. When auto sales — which tend to swing widely from month to month — are removed, sales at all other merchants rose by a strong 0.9 percent in January — the biggest gain in five months.

Consumers opened their pocketbooks and wallets in January to buy clothing, food, sporting goods, books and music and electronics and appliances. But those gains were more than offset by cutbacks in spending to buy cars and to purchase building and garden supplies, thus producing the overall decrease in sales.

The overall retail sales figure showing a 0.3 percent dip was weaker than the flat showing economists were expecting. But sales — excluding automobiles — was stronger than the 0.5 percent increase they were forecasting.

Thursday's retail sales report suggested that consumers still have an appetite to spend but they are being more selective.

Consumers are important to the economy because their spending accounts for roughly two-thirds of all economic activity. Throughout the economic slump and into last year's recovery, consumers pretty much carried the economy. But businesses have finally begun to do their part by boosting capital spending — a key ingredient to keep the expansion going.

Private economists are hopeful that any moderation in consumer spending will be more than compensated by strength in other parts of the economy. The economy is expected to grow at a rate of more than 4 percent in the current January-to-March quarter, a solid performance, analysts say.

The 0.3 percent decline in retail sales in January came after a modest 0.2 percent rise in December.

Much of the weakness suggested in January's sales figure came from a 3.9 percent decline in sales at automobile dealerships. That represented the largest decline in 11 months and followed a 0.2 percent increase in December.

Sales of building and garden supplies fell by 0.9 percent in January, reflecting bad weather in some parts of the country. That came after a 0.6 percent rise in December.

Shoppers, however, showed more of an appetite for other goods. Sales of clothing rose by 2.9 percent in January — the biggest increase since October 2002 — and a turnaround from a 0.2 percent decline in December.

Sales of sporting goods, music and books went up by 1.6 percent last month — the largest increase since August — and even better than a 0.6 percent increase posted in December.

Food stores saw sales rise by 1.8 percent in January — the biggest increase since December 1999 and an improvement from the 0.4 percent drop the month before. At department stores, sales rose by 0.5 percent — the best showing since July — after being flat in December.

Consumers also ate out more in January. Sales at bars and restaurants rose by 1.1 percent, up from a 0.5 percent increase in December.