Holiday Sales Off To A Slow Start Debt-Burdened Consumers Resist Going On Another Buying Spree

In a disappointing kickoff to the holiday shopping season, sales at department stores and clothing outlets sagged in October, pulling overall retail sales down.

Despite the sluggish spending by debt-heavy consumers, analysts said the overall economy is healthy. They predicted the Federal Reserve would not trim interest rates when it meets today in the midst of a government budget stalemate.

Just before closing its data-collection agencies in a government shutdown caused by that impasse, the Commerce Department said Tuesday that retail sales fell 0.2 percent in October, the first decline in three months. Sales rose a scant 0.1 percent in September, less than an earlier estimate of up 0.3 percent.

“Fourth-quarter consumer spending will be weak and Christmas sales are likely to disappoint retailers,” said economist Cheryl Katz of Merrill Lynch & Co. “All measures of consumer indebtedness are at or near record highs and, even more important, job and income growth are slowing.”

Although consumer spending accounts for two-thirds of the nation’s economic activity, analysts said the economy is strong enough to expand without a rate-cut boost from the Federal Reserve.

“The Fed is delighted with inflation and they don’t want to risk jeopardizing it by overstimulating an economy that doesn’t need it,” said Eugene Sherman of M.A. Schapiro & Co., Wall Street investors.

Economists said the budget stalemate practically ensures the Federal Reserve will leave interest rates untouched, at least until the central bank’s final meeting of the year, Dec. 19.

The Commerce Department said sales last month totaled a seasonally adjusted $197.2 billion, down from $197.6 billion in September.

While car buying rebounded in October, rising 0.7 percent after slumping 2 percent the previous month, there was sluggishness elsewhere. Excluding autos, retail sales fell 0.5 percent last month after a 0.8 percent gain in September.

Sales of all durable goods - those expected to last more than three years - edged up 0.2 percent last month after falling 1 percent in September.

All non-durable goods such as food, fuel and clothing fell 0.5 percent after gaining 0.9 percent the previous month. They have declined in three of the last four months.