BACK-TO-SCHOOLERS FUEL AUGUST RETAIL SALES

ALISON MAXWELL

WASHINGTON [FNS] -- Retail sales at grocery stores were up 0.3% in August after two months of flat sales, according to statistics released by the Commerce Department in mid-September.

Year-over-year sales were up 4.3%. August retail sales in the larger category of food stores were up 0.3% from the previous month and up 4.2% from August 1998.

"The month was a strong one for most types of retailers, and this augurs well for the balance of the year," National Retail Federation chief economist Rosalind Wells said in a statement. "Employment is still growing, wages are increasing, and consumer confidence remains high. With these positive indicators, we can expect the fall and holiday seasons to be very successful."

Sales at eating and drinking places were up 0.1% from July, and were up 7.6% for the year. Sales at drug and proprietary stores were up 0.9% for the month and 10.8% against August 1998.

Overall, U.S. retail sales surged 1.2% in August to $252.4 billion -- the largest increase in six months. On a year-over-year basis, sales were up 14.2%. July's sales increase of 0.7% was revised to 1.0%. Excluding the auto sector, August's retail-sales increase was 0.7%.

"The consumer isn't slowing down at all. He is still spending at full speed," said Larry Horowitz, a senior economist at Primark Decision Economics in Boston. "This will convince more people than before that the Federal Reserve will raise rates before the end of the year."

"I don't see any collapse, but I don't see any acceleration in retail sales for the rest of the year," Silver said. "If anything, the economy will slow somewhat because of the higher interest rates and the flat stock market."

"The main boost for August sales comes from back-to-school spending," said Robert Verdisco, president of the International Mass Retailers Association. "Mass retailers showed strong sales, particularly those selling casual apparel and other school-related items."

Back-to-school shopping gave apparel and accessories stores a boost in August after a couple of sluggish months.

Last month's sales at apparel stores were up 1.3% from July, and 7.4% for the year. It came after two months of month-to-month declines at these stores and was the best gain since April, when sales rose 1.9% from March. July's sales decrease at apparel and accessories stores, originally reported at 0.4%, was revised to 0.9%.

General-merchandise stores -- discount, department and variety stores -- didn't benefit as much from back-to-school sales. The stores posted a seasonally adjusted sales increase of 0.3% in August, following a 0.5% revised increase in July. Compared with August 1998, sales were up 8.5%. Sales at department stores, excluding leased departments, were up 0.1% for the month, after a revised July increase of 0.5%. Year-over-year sales at department stores were up 7.6%.

"In terms of back-to-school apparel, the relatively poor performance of department stores continues to be a troubling trend," Verdisco said. "Conventional department stores have been working to attract teen shoppers to their junior department, but August results indicated that conventional department stores have yet to bond with this important back-to-school segment."

Ira Silver, an economist with the JCPenney Co., said that although apparel stores recorded better sales for the month, "it is just a partial make-up for two very weak months." Averaging the past three months, apparel stores show a decline of 0.1%, he noted. He said that the average monthly increase for general-merchandise stores, department stores and apparel stores has remained at about 0.4% for the year.