Path: bloom-picayune.mit.edu!snorkelwacker.mit.edu!americast.com!americast.com!americast-post Newsgroups: americast.twt.news From: americast-post@AmeriCast.Com Organization: American Cybercasting Approved: americast-post@AmeriCast.com Subject: New-car purchases pace retail sales rise Date: Sat, 14 Nov 92 16:22:11 EST Message-ID: \SE A \SS (WS) \HD New-car purchases pace retail sales rise \SH Inflation jump called an aberration \BY ASSOCIATED PRESS The biggest increase in auto purchases in 20 months pushed retail sales a healthy 0.9 percent higher in October, the government said yesterday. Economists interpreted the bigger-than-expected gain as the best sign yet that the economy may finally be coming to life. Another government report said consumer prices shot up 0.4 percent in October, the fastest inflation pace in eight months, but economists said the gain was an aberration caused by factors such as a record jump in air fares. Last month's rise in retail sales, coming at the start of the all-important holiday season, could herald the best Christmas selling season for retailers since 1988, analysts said. The retail report also shows that the economy is not as moribund as they had feared. "The economy is starting to have a pulse again," said John Albertine, a Washington consultant. The 0.9 percent sales gain was the fourth consecutive increase, the longest string of advances since mid-1990, when the economy was heading into recession. The rise was led by a 2.9 percent surge in car purchases, the biggest gain in that area since February 1991, but it was widespread, with strength also shown in sales of furniture and clothing. "This is the most promising indication of a pickup in the economy that we have seen in a long time," said Allen Sinai, chief economist of the Boston Co. Economists gave a variety of reasons for the surprisingly good sales gain, from modest improvements in the jobless rate over the last four months to a possible firming in consumer confidence as the presidential election approached. But they were still puzzled at the timing of the rebound. Normally, consumer spending doesn't turn upward until after jobs pick up significantly and incomes start improving. Since neither of those factors is in place, some analysts worried the October spending gain could fizzle. "I don't think increases like this are sustainable," said Sandra Shaber, an economist at the WEFA Group, an economic consulting firm in Bala Cynwyd, Pa. But she said that even if spending gains over the next three months aren't as large, there is probably enough momentum in place to give merchants their best holiday sales season since 1988. The 0.4 percent rise in consumer prices was the biggest increase since a 0.5 percent rise in March. The October increase was blamed on several unusual factors. Air fares, which were held down by a summer fare war, shot up 7.8 percent last month, the biggest one-month increase on record. But analysts said airlines already have started to announce a new round of fare cuts. With factory operating rates still at very low levels and the labor market soft, there is little danger that inflation will get out of hand, analysts said. Through the first 10 months of this year, consumer prices rose at an annual rate of 3.1 percent, matching last year's modest gain. Inflation for next year is also expected to hover around 3 percent. "Inflation is not as bad as it looks on the surface. There were a number of special factors including a change in rent-control rules in New York that caused the big jump in rental prices," said David Wyss, an economist at DRI-McGraw Hill Inc. For October, energy prices climbed 0.5 percent, led by a 0.6 percent rise in gasoline prices and a 1.2 percent spurt in home heating oil. Food prices showed a modest 0.1 percent rise last month as fruit and vegetable costs edged down 0.2 percent after posting a big increase in September. Outside the volatile food and energy categories, the underlying inflation rate took a jump upward as well, rising by 0.5 percent, the biggest increase since a similar rise in March. In other economic news yesterday: * The Labor Department said Americans' average weekly earnings, after adjusting for inflation, rose 0.4 percent in October, a small improvement after a 1.4 percent drop the previous month. * The National Association of Realtors reported home prices managed a tiny 1.6 percent increase nationwide from July through September. This article is copyright 1992 The Washington Times. Redistribution to other sites is not permitted except by arrangement with American Cybercasting Corporation. For more information, send-email to usa@AmeriCast.COM