Weak auto sales brake retail gain

WASHINGTON (AP) Retail sales rose 0.1 percent last month asstrength at department stores and furniture stores only partiallyoffset a big drop in auto sales, the government said yesterday.

The Commerce Department said sales totaled a seasonally adjusted$118.7 billion last month after a 0.1 percent decline in June.

While the monthly increases in retail sales have been somewhatlackluster this year, consumer spending has been one of the fewbright spots of the economy.

Economists explain the discrepancy by noting that the retailsales figures are reported without discounting for price changes.Since consumer prices have been declining for much of this year, thishas made sales look weaker.

The small July advance was in line with expectations of manyanalysts, who had been looking for a sluggish report because autosales were weak for the month.

Sales at auto dealers fell 1.7 percent, the steepest drop sinceMarch. Without this weakness, over-all retail sales would haveadvanced by 0.6 percent, the best performance in the non-autocategory since February.

"If you look beyond cars, consumer spending is still holdingup," said Sandra Shaber, consumer economist for Chase Econometrics, aforecasting firm. She predicted the pattern of sluggish auto salesbalanced against strength in appliance and home furnishing sales willcontinue in coming months.

Commerce Secretary Malcolm Baldrige, however, predicted thatauto sales will rebound in response to renewed dealer incentives andthat this increase will bolster overall spending gains.

Jeff Shapiro, an economist with Wharton Econometrics, also wasoptimistic about retail sales in coming months. He predictedconsumers will soon begin to spend the savings they have achievedfrom dramatically lower energy bills.

Shapiro predicted the economy, as measured by the gross nationalproduct, will expand at a 3.2 percent annual rate in the final sixmonths of this year.

Sales of durable goods, items expected to last three or moreyears, fell 0.1 percent in July. The weakness came from the declinein auto sales.

Two categories tied to the booming housing sales market showedstrength during the month. Sales at furniture stores rose a solid1.6 percent and sales at hardware and building supply stores were up2.9 percent.

Sales of non-durable goods were up 0.2 percent in July withdepartment stores posting a 0.6 percent gain and sales at grocerystores rising 0.8 percent. Analysts said part of the increase atgrocery stores came from a jump in food costs last month.