Consumers Turn Wary

President George W. Bush reads over a draft of his State of the Union speech in the Oval Office Tuesday morning, Jan. 31, 2006, in preparation for the annual address to the nation scheduled for this evening. White House photo by Eric Draper
White House Photo/Eric Draper
Incentives from automakers lured buyers into showrooms in September, helping to boost overall retail sales by 0.3 percent to $224.9 billion, the Commerce Department said Wednesday.

Excluding auto sales, retail sales rose 0.1 percent, the same increase as in August.

The increase fell short of economists' expectations of a 0.5 percent gain, and possibly indicates that consumer spending is slowing.

Retail sales were weak in July and August as auto sales were held back by a lack of General Motors (GM) vehicles due to the strike. The department revised its estimate of August sales to unchanged from a gain of 0.2 percent

Retail sales rose 4.1 percent in the third quarter from the third quarter in 1997 after rising 6.3 percent in the second quarter.

Economists are looking at the retail sales numbers carefully for signs of a consumer pullback. Consumers, who account for two-thirds of economic activity, have been the main engine of U.S. prosperity. Retail sales account for about half of consumer spending. If consumer confidence and spending wane, the economy could slow further.

Durable goods sales represent the kind of discretionary purchases consumers can put off for months or years waiting for better prices or more income security. Durable goods sales rose 0.6 percent to $93.8 billion in September while nondurable sales rose 0.1 percent to $133.2 billion.

In September, auto sales rose 0.9 percent to $54.4 billion after falling 0.1 percent in August and 4.3 percent in July. Automakers and dealers gave consumers rebates and attractive financing to move 1998 models off the lots to make room for the 1999 models.

Other durable goods industries were weaker. Sales at building supply stores increased 0.4 percent to $13.8 billion. Sales at furniture and appliance stores fell 0.2 percent to $13.4 billion after showing no gain in August. Sales at these two types of stores had been boosted by record purchases of homes, which has slowed somewhat.

In the nondurable sector, sales at general merchandise stores rose 0.7 percent to $29.6 billion. Sales at grocery stores rose 0.3 percent and restaurant sales increased 0.8 percent.

On the negative side, sales at apparel stores fell 1.3 percent and gas station sales dropped 0.8 percent.

Written By Rex Nutting