October 12, 1996 in Nation/World

Signs Point To A Green Christmas Retail Sales Rebound From Slump

Associated Press
 

Wholesale inflation pressures eased in September while retail sales rebounded from a summer slump. Investors greeted Friday’s news with glee, believing the all-important Christmas season could turn out better than expected.

Financial markets shook off a week-long funk to push stock prices higher. The Dow Jones industrial average closed up 47.71 points Friday.

The Commerce Department said retail sales rose an unexpectedly strong 0.7 percent in September, following a summer in which sales had fallen 0.6 percent in June and 0.2 percent in August and managed only a meager July advance of 0.2 percent.

The better-than-expected 0.7 percent September advance left some economists forecasting that this year’s all-important Christmas season will be better than first feared. The holiday season can account for as much as half of a retailers’ yearly sales and profits.

“Santa may want to start ramping up production,” said William Cheney, chief economist at John Hancock Financial Services in Boston. “As close as we are to Christmas, this clearly is a good indicator.”

Mark Vitner, senior economist at First Union in Charlotte, N.C., agreed, saying, “We believe we can have a pretty decent holiday shopping season because income growth is strong, consumer confidence is high and the previous quarter was so weak.”

Retail sales for August and July were revised downward in Friday’s report, causing some analysts to mark down their growth forecast for the third quarter.

Bruce Steinberg, senior economist at Merrill Lynch in New York, said he believed the overall economy was growing at a sluggish rate of 1.7 percent in the July-September quarter, far below the 4.7 percent rate of the spring.

The sales strength was led by a 1.7 percent increase in demand at auto showrooms. Excluding autos, sales posted a healthy 0.4 percent advance with increases posted at department stores, furniture stores, restaurants and supermarkets.

The government will release its report on consumer prices Wednesday. Analysts said if that report also shows moderation, it will provide more ammunition to those on the Federal Reserve who are arguing that the central bank does not need to start raising interest rates.

© Copyright 1996 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.


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