Originally created 02/12/99

Shoppers keep on shopping after the holidays



WASHINGTON -- After-Christmas discounts enticed shoppers into department stores and malls in January, helping to produce a modest increase in retail sales on top of stellar gains during the holidays.

The increase, reported Thursday by the Commerce Department, followed a large 1 percent gain in December and dovetailed with economists' belief that robust economic growth at the end of 1998 is carrying over into early 1999.

"January's retail sales level was not spectacular, but given what happened at the end of 1998, even a small increase is impressive," said economist Joel Naroff of First Union Corp in Philadelphia. "People spent tons of money on everything in the malls."

In another sign the good times just won't quit, the number of unemployment applications unexpectedly dropped last week to the lowest level in more than a year and a half.

Jobless claims dropped by 13,000 to a seasonally adjusted 281,000, the lowest level since July 1997, the Labor Department said.

"A strong labor market has been one of the key fundamentals driving consumer spending over the past year and the figure on initial (unemployment) claims indicate that labor demand remains strong," said economist Michael Moran of Daiwa Securities America Inc.

Low interest rates, restrained inflation and high stock prices also have driven sales higher.

"Consumers continue to spend like drunken sailors because their stock portfolios rack up big gains," said economist Ken Mayland of KeyCorp in Cleveland. "That underscores a major point: with respect to consumer spending growth in 1999, the stock market could be either a saving grace or a major depressant."

For now, though, half the respondents to an ABC News poll said now is an excellent or good time to buy things they want or need.

While the overall increase in sales was relatively muted, sales at department stores and other general merchandisers soared 1.5 percent, the biggest increase in 11 months. In a separate report earlier this month, big discount chains such as Wal-Mart, Target and Kmart recorded the strongest gains.

Clothing, shoe and accessory shops reported a 1 percent increase in January, and drug stores, an 0.8 percent advance.

Meanwhile, auto sales rose 0.2 percent on top of a big 2.2 percent jump in January. Receipts at building-supply and garden centers were unchanged after a healthy 1.9 percent gain in December.

Furniture sales fell 0.4 percent, the worst performance in nine months. They were strong through much of 1998, helped by spillover from record home sales.

Sales also fell at food stores, 0.5 percent; gas stations, 0.5 percent; and restaurants and bars, 0.2 percent.

Analysts said falling prices depressed receipts at gas stations and food stores. They said a cold snap early in the month probably helped clothing sales but hurt restaurant turnout.