By  on October 15, 2007

WASHINGTON — September sales at apparel and accessories stores fell a seasonally adjusted 0.4 percent compared with August, as department stores registered a 0.5 percent drop.

Unseasonably warm weather was at least partly to blame, but the weakness also could be foreshadowing what is expected to be a slower holiday season than the industry has seen in recent years.

Against a year earlier, sales at apparel and accessories stores strengthened 2.4 percent to $18.9 billion, as department store sales dropped 2.2 percent to $17.5 billion, according to a Commerce Department report on monthly sales.

The weakness echoed generally poor same-store sales results reported by major chains on Thursday that showed gains among mass merchants, but declines at department stores and specialty stores.

Despite the retreat at fashion retailers, total retail and food service sales increased a stronger-than-expected 0.6 percent, double the previous month's figure. Still, economists expect the slowdown in the housing market, the subprime mortgage crisis and the credit crunch to restrain consumers and the economy.

"Consumers don't react in a knee-jerk fashion to an event in the credit markets like we had in August," said J.P. Morgan Chase & Co. economist James Glassman. "The trends are moderate. They're not shifting down, but the sense is that we're going to see a gradual deceleration. Given all the problems in the housing market, it would be surprising if we didn't. There are a lot of people who are getting squeezed. There are a lot of mortgages being reset."

As the housing market heated up, propelled by lower interest rates, many homeowners took on adjustable-rate mortgages that can change, dramatically increasing payments and, in some cases, forcing foreclosures. Areas where the housing boom was most pronounced, such as Florida and California, could be hit the hardest.

However, the economic picture isn't one of complete gloom.

"Clearly, consumer finances are under pressure right now," said Scott Hoyt, director of consumer economics at Moody's Economy.com, who anticipates modest spending growth.

Still, he described the labor market as tight and said wage growth would help support the consumer over the holidays.

"There are factors in place that should keep this from being recession-like bad, but it still won't be as good as we've been used to," Hoyt said.

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