August Retail Sales Up a Moderate 0.7% : Analysts Foresee More Sluggishness for Rest of Year

WASHINGTON —  Retail sales rose a moderate 0.7% in August because of strong automobile sales, the government reported today, but analysts foresee growing sluggishness in the remainder of the year.

The Commerce Department said sales increased to a seasonally adjusted $144.3 billion in August after a 0.5% gain in July. Sales had remained flat in June after rising 0.8% in May.

Analysts said the report was consistent with the so-called “soft-landing” scenario sought by the Federal Reserve as it moves to keep inflation under control while permitting continued, but slower, economic growth.

At the White House, Press Secretary Marlin Fitzwater said the August figure is “an indication of continued but slow growth in the current economic expansion, which is now in its 82nd month, so it’s good news.”

Auto sales, which represent about 20% of retail sales, advanced 2.6% last month, driven by end-of-model-year sales incentives and the threat of steep price increases for 1990 models. Those sales had risen 1.7% in July.

But Michael K. Evans of Evans Economics Inc., a Washington consulting firm, said: “Auto sales have peaked. They came in low (in early September). October will be way down. So total retail sales will be down.”

“I think we will see a decided weakness in auto spending in the fourth quarter,” agreed Allen Sinai, chief economist of the Boston Co.

Excluding the automobile category, retail sales edged up only 0.2% in August.

Sales of durable goods, big-ticket items including autos that are expected to last more than three years, rose 2.4% on top of an 0.8% gain in July. On the other hand, sales of non-durable goods fell 0.4% after rising 0.4% a month earlier.

Evans and William K. MacReynolds, director of forecasting for the U.S. Chamber of Commerce, attributed the strength in durable goods sales to lower interest rates and discount prices.

“Consumers are willing to spend money, but they have to be enticed,” Evans said.

In the durable goods category, building materials advanced 2.2% and furniture and other home furnishing sales gained 1.6%, reflecting in part, analysts said, both increased home sales and remodeling.

The only advances in the non-durable goods category were apparel sales, up 1.1% in part because of back-to-school clothes shopping, and drugstores, up 1.4%.

But general merchandise sales, including department stores, did not benefit as much from the back-to-school spending, analysts said, and fell 0.9%.