American consumers appeared to have exercised unusual control over their shopping addiction in January, causing
of a number of items, aside from automobiles, to fall for the first time since December 1997.
reported Friday that although retail sales increased 0.3% in January, they declined 0.3% once a 2.3% rise in auto sales was excluded. The consensus of economists surveyed by
had forecast a 0.8% gain in total sales, and a 0.7% gain excluding auto sales.
But economists warned that the lower-than-expected sales are an anomaly, easily explainable by consumers stocking up on many products in December in fear that a Y2K computer failure could cut the supply lines to stores.
In addition, sales for November and December were revised sharply upward, making January sales look even smaller.
"This isn't really evidence of any sort of economic slowdown." said Joe Abate, an economist at
. "What we are seeing is more of the Y2K effect."
Comforted by the prospect of slower consumer activity, government bonds rose Wednesday. As the price rose on the benchmark 30-year bond, its yield dipped to 6.27% vs. 6.35% late Thursday.
Though the bond market found the weak retails sales figure encouraging, economists said the news is not likely to dissuade
policymakers from raising interest rates again when they meet in March.
Stores that saw the largest declines were ones that carried the items most obviously stockpiled by consumers before New Year's Day. For example, drugstore sales declined 0.9% vs. a 1.8% gain in December; grocery store sales declined 2.3% in January vs. a 3.2% gain in December.
But sales of other items, which might not have been part of consumers' pre-Y2K buying strategy, remained robust. Department store sales were up 0.9% in January, general merchandise store sales rose 0.8%, while apparel store sales rose 0.7%.
"Between the post-holiday clearance sales and the extra money that many people had taken out of banks in fear of a computer glitch, we saw some types of items post a healthy rise in January," Abate said.
Though the month-to-month figures were soft, the year-over-year growth in January retail sales growth remained very strong, rising 9.6% vs. January 1999, and 8.3% excluding autos.
That kind of strength has been driven by the record high consumer confidence that has come along with rising compensation and wages and the ever-growing wealth bestowed on Americans by the ever-growing stock markets.
Recent measures by the
University of Michigan
showed that consumer confidence has recently risen to all-time highs.
Armed with that confidence, consumers are choosing to put their money into goods and services rather than into bank accounts. The government recently reported that the country's savings rate -- the difference between what people make and what they spend -- fell to an all-time low of 2.4% in 1999.
The year-over-year gains were in agreement with recent figures on chain store sales, widely seen as a benchmark for the retail industry as a whole. Results from a
Bank of Tokyo-Mitsubishi
tally of 67 retail chain stores showed that January sales rose 5.4% from the same month in 1999, and a report by
, a unit of New York-based
Lynch, Jones & Ryan
which tracks the retail industry, showed a similar 5.1% gain in January retail sales.
Consumers may be more confident than ever, but the Fed is casting a leery eye on their relentless spending patterns, fearful that inflation -- the enemy of the government, consumers and financial markets -- may be lurking. Conventional economic wisdom says that when more and more dollars are chasing the same amount of goods and services, prices will rise.
So far, however, there have been few signs of widespread consumer inflation. The
consumer price index
rose 2.7% in 1999 -- considerably higher than the 1.6% recorded in 1998 but well below the 5% levels seen early in the 1990s. Moreover, the 1999 acceleration was due to a 30% jump in gasoline prices, whose supply and demand situation is largely in the hands of the
Organization of Petroleum Exporting Countries
Most economists say that huge corporate investment in computer technology in recent years has enabled companies to get more out of each worker, allowing them to grow considerably without increasing the cost of their products.
But Fed policymakers are bent on making sure inflation does not become a problem. Earlier this month, the Fed raised interest rates by a quarter percentage point, following three similar increases last year, in hopes that more restrictive access to capital will slow spending by consumers and companies.
That has led to a general feeling that the Fed will continue to raise rates until it is assured that spending, and the economy in general, is slowing.