Bad News on the Economy

September 14, 2005

The news from the Commerce Department was disappointing, but could not be considered surprising.

Plummeting retail sales in August were reported Wednesday, indicating economic weakness in advance of Hurricane Katrina.

Sales dropped 2.1 percent in August, including a 12 percent falloff in the automobile sector. An overall increase of 1 percent was the result when autos are excluded. Automobile sales had improved 6.3 percent in July.

Economists have reported that the hurricane could slash growth by a percentage point during the second half of the year. The 2.1 percent decline represented the greatest drop since a 2.9 percent falloff in November 2001.

And where was the greatest increase in sales last month? Answer: gas stations, with a 4.4 percent boost as prices skyrocketed beyond $3 per gallon. Excluding sales at gas stations, the overall drop in sales last month would have been 2.8 percent.

Other results included: clothing store sales were flat after falling 0.9 percent in July; department store sales were up 0.3 percent following a 0.2 percent drop in the prior month; furniture store sales improved 0.9 percent; and sales at appliance and electronic stores were up 0.3 percent.

By Glenn J. Kalinoski, Executive Editor, Customer Inter@ction Solutions