Auto Industry Slows Down U.S. Retail Sales Growth

THE JOURNAL RECORD, September 16, 1998 | Go to article overview

Auto Industry Slows Down U.S. Retail Sales Growth


WASHINGTON (Bloomberg) -- U.S. retail sales grew at a subdued pace last month because of low prices and sluggish business at auto dealers. Still, there are few indications consumer spending is about to evaporate.

August sales rose 0.2 percent -- less than the 0.5 percent expected gain -- after declining 0.6 percent in July, Commerce Department figures showed Tuesday. When autos are excluded, retail sales rose 0.3 percent last month after rising 0.6 percent in July.

That suggests there's "no falling off a cliff," said John Ryding, a senior economist at Bear Stearns in New York, as job and income growth keep consumers spending, if at a slower pace than earlier in the year.

Third quarter consumer spending will probably cool to a 2 percent annual growth rate, about a third of the 5.9 percent pace recorded during the prior three months, said Christopher Low, chief economist at First Tennessee Capital Markets in New York.

One sign spending could slow is a drop in consumer confidence, which has been tempered by the recent drop in U.S. stock prices and by turmoil in the global economy. The Conference Board reported that its index gauging consumer expectations for the next six months fell in August for a second straight month.

Many retailers have reported vigorous sales this year.

"Pier 1 Imports continues to benefit from a strong U.S. economy," said Marvin J. Girouard, president and chief executive officer of the North America's largest specialty retailer of imported decorative home furnishings. Second quarter sales at the company rose 9.1 percent from the same three months last year.

At Best Buy, the biggest U.S. electronics retailer, second quarter earnings doubled forecasts because of strong sales of televisions, camcorders and entertainment software, the company said Sept. 3. Total sales at Best Buy's 289 stores rose 22 percent to $2.2 billion.

Consumers were "feeling pretty confident of where they are in the nation's economy. Both with strong employment, with real wage growth and low inflation, consumers are spending money for our kinds of products," said Richard Schulze, chief executive officer at Best Buy, in an interview.

So far this year, shares of Best Buy are up a whopping 181 percent. And the Standard & Poor's retail stores composite index, a gauge of the performance of 36 retail companies listed in the S&P 500, has gained more than 18 percent so far this year.

That compares with a 6.6 percent rise in the broader S&P index. The strength of the retail index, which includes such companies as Home Depot, Circuit City, Sears Roebuck and Wal-Mart, is a reflection of the consumer appetite for goods that has characterized the economy this year.

At the same time, companies have had difficulty raising prices on the merchandise they sell as the cost of imported goods keeps declining and because consumers simply take their business elsewhere. …

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Auto Industry Slows Down U.S. Retail Sales Growth
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