Car Market Slump Fuels 1% Decline in October Retail Sales

WASHINGTON —  Retail sales, pulled back by a sluggish automobile market, fell 1% in October for their first decline in eight months, the government reported today.

The Commerce Department said overall sales dropped to a seasonally adjusted $144.5 billion last month after rising 0.9% in August and 0.7% in September.

The last time retail sales fell was in February, when they dropped 0.4%. They were unchanged in June.

The October decline was the largest since a 6.7% drop in January, 1987.

Retail sales account for about one-third of the nation’s economic activity and are watched as a sign of the extent to which the Federal Reserve’s policy of fighting inflation by tightening credit is slowing the economy.

Auto sales, lacking major incentive programs during the month, plunged 5.1% in October. Car sales, which represent about 20% of the retail total, had been propped up by incentives for much of the year and rose 0.5% in September and 2.2% in August.

The October decline was the largest since auto sales fell 26.5% in January, 1987.

Excluding the automobile category, retail sales edged up 0.2%.

Sales of durable goods--items expected to last at least three years--fell 2.7%, their steepest fall since a 2.8% decline in October 1987. Durable sales were flat in September after gaining 2% in August.

The durable goods market has been particularly hard hit by the Fed’s interest-rate policies because such purchases often are financed by loans.

Sales of building materials rose 0.9% after falling 1.3% in September and advancing 1.7% in August. Furniture and other home furnishing sales edged up 0.3% following a 0.6% drop in September and a 1.6% gain in August.

Sales of non-durable goods edged up 0.1%, following a 1.1% gain in September and a 0.1% decline in August.

Non-durable categories showing increases were department stores, up 0.3%; grocery stores, 1%; apparel, 0.2%, and drug stores, 1%.

Non-durable categories posting declines were gasoline stations, down 0.9%, and restaurants and bars, off 0.2%.

For the three months from August through October, overall retail sales were up 6.3%. Sales for the first 10 months of 1989 were up 6% over the same period of 1988.