Decline in Auto Sales Hurts Retail Results

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Retail sales, hurt by a big drop in auto purchases, slowed in January to the weakest performance in three months.

The Commerce Department reported Wednesday that sales essentially were flat last month, the poorest performance since a 0.2 percent drop in sales in October.

The weakness caught analysts by surprise. They had been expecting a gain of 0.3 percent based on reports from the nation's big chain stores that customers had been busy in January redeeming their Christmas gift cards and snapping up coats and other winter gear with the delayed arrival of frigid weather.

Sales at department stores did show strength during the month but this was offset by a 1.3 percent decline in sales of autos as the nation's car makers continue to struggle with weak demand. It was the biggest one-month drop in auto sales since a 2.4 percent plunge last June.

Excluding the big decline in autos, retail sales managed a better 0.3 percent increase although this gain was lower than the 0.4 percent rise, excluding autos that Wall Street had been expecting.

Consumer spending is closely watched because it accounts for two-thirds of total economic activity. The retail sales report was the latest indicator flashing a weaker-than-expected signal. On Tuesday, the government reported that the trade deficit rose in December after having declined for three months.

Analysts have been revising down their views on economic growth, saying they now believe the economy, as measured by the gross domestic product, was rising at a more sluggish 2.5 percent annual rate in the final three months of last year.

That would be a full percentage point below the initial estimate that the GDP was growing at an annual rate of 3.5 percent in the fourth quarter. The government will issue a revised GDP estimate on Feb. 28.

For January, gasoline station receipts fell by 0.7 percent, reflecting a decline in pump prices. The retail sales numbers are adjusted for normal seasonal variations but they are not adjusted for inflation. Excluding the drop in gasoline sales, retail sales would have been up a slight 0.1 percent.

Sales at department stores and other general merchandise stores were up a solid 1.3 percent, the biggest one-month gain in a year.

Sales were also strong at furniture stores, up 0.8 percent, and hardware stores, which posted a 0.8 percent gain, increases that might reflect that the worst of the housing slump is over.

Sales at electronic and appliance stores, which had boomed with Christmas demand for the latest electronic gadgets, fell by 1.2 percent in January.