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Retail sales edge up
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July 14, 1998: 9:35 a.m. ET
June's 0.1 percent rise falls short of forecasts; auto sales appear sluggish
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NEW YORK (CNNfn) - Sales in the retail sector just barely managed to eke out an eighth straight month of gains in June as consumers eased up on a prior-month spending spree driven largely by booming automotive sales.
Retail sales rose 0.1 percent to a seasonally adjusted $225.69 billion in June, a dramatic drop from May's revised increase of 1.2 percent and shy of Wall Street forecasts of a 0.4 percent jump.
Sales of new automobiles remained lackluster, despite heavy incentives aimed at luring car buyers to the showroom. Auto sales, which typically account for one-quarter of all retail sales, rose in tandem with the overall index. Excluding automobiles, retail sales rose 0.1 percent following a 0.9 percent rise in May.
Analysts portrayed the softened June sales as a blip on the economy radar, insisting that the underpinnings of a strong economy remained in place. Consumer sales normally account for about two-thirds of U.S. economic activity.
"The trends are still favorable, but what's more important are the driving forces are favorable," said Larry Chimerine, an economist with the Economic Strategy Institute. Chimerine noted that household wealth and consumer confidence remained robust, despite tentative signs of a slowdown in other sectors.
"When the fundamentals are this favorable, generally people will spend, and for that reason I don't see any fundamental retrenchment in consumer spending."
"It's basically a status quo economy," Chimerine added, with strong growth led primarily by domestic demand, retail growth and housing offsetting trade imbalances triggered by the Asia crisis.
Car dealers posted a 0.1 percent increase in sales in May to $56.26 billion, reflecting the lure of strong rebate programs across the auto industry. In May, auto sales rose 2.4 percent.
Sales in the apparel sector dipped 0.4 percent to $10.39 billion, in line with May's identical drop, while building materials marked a 0.2 percent decline, to $13.88 billion. Gasoline sales slackened 0.1 percent to $12.49 billion, slumping dramatically from May's 0.9 percent increase.
On the potential downside, Chimerine said the U.S. trade deficit could increase by $50 billion by year's end as the ripples from Asia lap America's shores.
"Probably it's going to start sapping economic growth," he said. "The cumulative effect of deficits could have long-term implications." 
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