Wall St up as retail sales drop

Press, 14 April 1984, Page 23

Wall St up as retail sales drop

NZPA-Reuter Washington United States retail sales fell 2.2 per cent in March, the steepest monthly drop for more than a decade, which suggests that the pace of economic growth has eased. Reacting to the news, the New York stock market leaped ahead in the final hours of trading on Thursday. The Dow Jones industrial average posted its biggest gain in seven weeks amid signs that pressure may be subsiding on United States interest rates. Trading was moderately active. Good earnings reports were also credited for helping blue-chip issues revive late in the day to lead the gainers that were prominent in almost every industry category. The Dow Jones average of 30 industrials rose 26.17 points to close at 1157.14. It was the biggest one-day rise in the average since February 24 when it finished up 30.47 points at 1165.10. The retail sales announcement, from the Commerce Department, was welcomed by Reagan Administration officials. “The decline should be helpful in terms of taking the pressure off interest rates,” a White House spokesman, Mr Marlin Fitzwater, said. It should also offer a bit of relief to economists and investors on Wall Street who feared that the econ-

omy was expanding dangerously fast, Mr Fitzwater said. The economy appears to be settling down to a more sustainable growth rate that would, it was hoped, “spur some declines” in interest rates, he said. The unexpectedly sharp downturn in sales was partly because of bitter, late-winter storms that whipped across the country. The United States dollar dipped for a time on financial markets in New York and Europe after the news because of the thought that further rises in American interest rates might not be necessary to keep inflation in check. But it later recovered its losses. United States prime interest rates have risen from 11 to 12 per cent in the last month and the Federal Reserve Board has also raised its discount rate by half a point. , . The March drop in sales'was the largest since they went down 2.4 per cent in December, 1973. Retail buying activity was also off in February, down 0.8 per cent from January. ’"This is clearly a signal that consumer spending is slowing,” said Mr Robert Wescott, of Wharton Econometric Forecasting Associates, in Pennsylvania. Despite the two consecutive monthly declines, the volume of sales during the first quarter of the year was 3.4 per cent greater than in the preceding three-month period and 13.4 per cent over the first quarter of last year. The strong first-quarter showing was fuelled entirely by a post-Christmas buying spree.