WASHINGTON -- U.S. retail sales unexpectedly fell in November as demand weakened for autos and clothing, the government said yesterday. Other reports showed little evidence inflation and continued low unemployment.
The economy "is weakening faster than we thought," said David Wyss, an economist at DRI/McGraw Hill in Lexington, Mass. "The Federal Reserve may not have to raise interest rates at all."
U.S. stocks slumped, though, as the weaker-than-expected retail sales report renewed concerns that share prices are higher than justified by prospects for corporate earnings. An early bond rally also fizzled.
Retail sales declined 0.4 percent in November after rising 0.3 percent a month earlier. Meanwhile, prices U.S. consumers pay for goods and services rose 0.3 percent in November at the same pace as the previous two months, further evidence inflation remained tame.
Additionally, fewer Americans than expected applied for state unemployment benefits last week -- the third consecutive weekly decline, a sign labor markets remain healthy. First-time jobless claims dropped by 13,000 to a seasonally adjusted 317,000 in the week ended Dec. 7, the Labor Department said.
Stocks declined broadly as the benchmark Dow Jones industrial average fell 98.81 points to close at 6,303.71. The benchmark 30-year U.S. Treasury bond, which rose about a point following release of the retail sales and inflation reports, was unchanged in late afternoon trading, leaving the yield at 6.62 percent. The dollar was higher against other major currencies.
The government said auto sales slumped 2.6 percent during November, and analysts said this weakness may extend into the new year. Car sales are particularly weak, forcing automakers to resort to big rebates on a broad range of cars to clean out inventories.
Auto sales slid 1.7 percent in November and are expected to show another decline this month. Still, 1996 is expected to finish about 2 percent ahead of 1995, with car and truck sales totaling 15.1 million.
Private forecasts of retailers' same-store sales, or sales in stores open at least a year, show weakness in early December -- though major U.S. retailers like Wal-Mart Stores Inc. and Dayton Hudson Corp. say their Christmas sales are strong in all categories and running in line with expectations.
While most analysts agree that retailers aren't resorting to panic discounting to bring in shoppers, markdowns are increasing.
"There's only 13 days left until Christmas, so for a lot of retailers it's now or never, do or die," said Kurt Barnard, president of Barnard's Retail Marketing Report. "If they don't soon see the huge crowds, they are likely to push the panic button and start marking down. Some retailers have already begun that, but not as many as last year."
The Commerce Department said retail sales without autos and other vehicles rose 0.3 percent last month after increasing 0.4 percent in October.
Yesterday's inflation report continued to show a lack of price pressures facing consumers, particularly when volatile energy costs are excluded. The core rate of the Labor Department's consumer price index, or CPI, which excludes food and energy costs, rose 0.2 percent in November, the same as in October.
Energy costs showed by far the biggest increase in today's report, rising 1.2 percent in November. That's the largest energy price increase since April, as gasoline, heating oil and natural gas prices all moved higher. In recent days, though, oil prices declined after the United Nations allowed Iraq to resume petroleum sales to raise cash for humanitarian purposes. For the first 11 months of this year, the CPI was running at a 3.3 percent annual rate, up from 2.6 percent in the first 11 months of 1995.
Pub Date: 12/13/96