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Decline in auto buying trips January retail sales

WASHINGTON -- A steep decline in car buying depressed sales at the nation's retailers by 0.3 percent last month, although consumers continued spending heartily in less expensive ways.

The overall decline -- the first since September -- was reported by the Commerce Department yesterday. It largely reflected a sharp drop in sales of automobiles. When auto sales -- which tend to swing widely from month to month -- are removed, sales at all other merchants rose by a strong 0.9 percent in January -- the biggest gain in five months.

"Though the first month of the year is traditionally slow, retailers should be pleased that consumers are still spending after the holiday season," said Tracy Mullin, president of the National Retail Federation.

Consumers opened their pocketbooks and wallets in January to buy clothing, food, sporting goods, books and music, and electronics and appliances. But those gains were more than offset by cutbacks in spending to buy cars and to purchase building and garden supplies, thus producing the overall decrease in sales.

In other economic news, the Labor Department reported that new claims for unemployment insurance rose last week by a seasonally adjusted 6,000 to 363,000, a two-month high. Part of the increase was blamed on bad weather in the Southeast, which forced weather-sensitive companies to lay off workers.

Businesses -- feeling more confident about economic conditions -- boosted inventories by 0.3 percent in December, the Commerce Department said in a second report. It marked the fourth month in a row that businesses added to their stocks. Businesses' sales, meanwhile, rose by 0.9 percent in December, the largest increase since September.

On Wall Street, however, the latest figures on retail sales and jobless claims disappointed investors. The Dow Jones industrials lost 43.63 points to close at 10,694.07.

The overall retail sales figure showing a 0.3 percent dip was weaker than the flat showing economists were expecting. But sales -- excluding automobiles -- was stronger than the 0.5 percent increase they were forecasting.

Yesterday's retail sales report suggested that consumers still have an appetite to spend but they are being more selective.

Consumers are important to the economy because their spending accounts for roughly two-thirds of all economic activity. Throughout the economic slump and into last year's recovery, consumers pretty much carried the economy. But businesses have finally begun to do their part by boosting capital spending -- a key ingredient to keep the expansion going.

Private economists are hopeful that any moderation in consumer spending will be more than compensated by strength in other parts of the economy. The economy is expected to grow at a rate of more than 4 percent in the current January-to-March quarter, a solid performance, analysts say.

The 0.3 percent decline in retail sales in January came after a modest 0.2 percent rise in December. Much of the weakness suggested in January's sales figure came from a 3.9 percent decline in sales at automobile dealerships. That represented the largest decline in 11 months and followed a 0.2 percent increase in December.

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