Byline: Carol Emert

WASHINGTON — Retail sales dropped 0.5 percent in February against January on a seasonally adjusted basis, with apparel specialty stores and general merchandise stores showing two of the largest declines, according to Commerce Department figures released Tuesday.
Specialty store sales fell 1.2 percent to $8.87 billion last month from $8.97 billion posted in January. General merchandise stores dropped almost as much, 1.1 percent, to $24.49 billion from $24.77 billion in January. Department store sales declined 0.5 percent, falling to $18.95 billion from $19.04 billion.
Against February of 1994, specialty store sales were down 0.9 percent, while department stores gained 6.7 percent and general merchandise sales increased 5.4 percent.
February’s decline in total retail sales was the first monthly downturn in retail sales since last April.
“Clearly this is further evidence that markets have cooled a lot” as a result of interest rate increases, said Sandra Shaber, senior vice president of the WEFA Group, an economic forecasting firm in Bala Cynwyd, Pa.
Two factors that are weakening consumer spending, according to Shaber, are a slowdown in job growth and higher interest rates on adjustable rate mortgages, credit cards and other payments.
The report indicates that “it’s going to be a tough year for retailers, there’s no question,” Shaber said. “The [impact of] price sensitivity on margins, which we’ve seen throughout the recovery, will be getting worse…as interest rates continue slowing down the overall economy.”
Apart from specialty stores and general merchandise stores, the largest sales declines last month were among car dealers, with sales down 1 percent, and furniture and equipment stores, where sales declined 1.2 percent. The only increase among the 12 types of retailers tracked by Commerce was a modest 0.1 percent gain for gas stations.
Despite the across-the-board bad news for retailers, Shaber asserted that the February report does not indicate “a collapse.” The numbers look worse in light of unusually strong upward revisions in the data for January, she noted.
For example, department store sales gains in January against December were revised upward to 2.1 percent in the latest report from 1.3 percent reported last month. General merchandise sales increases were adjusted to 2.3 percent from 1.1 percent. Specialty store sales, however, bucked the trend and were lower with the revised data, which is more complete. Tuesday’s report noted a 0.6 percent sales decline in January against December, compared to a drop of 0.5 percent reported earlier.
Overall retail sales in January were revised upward to a 0.6 percent gain against December, compared to the 0.2 percent gain tallied in the previous report.
Retail sluggishness makes it less likely that Federal Reserve policy makers will decide to raise interest rates again this year, Shaber said. The Fed raised short-term rates seven times between February 1994 and February 1995. — Fairchild News Service