Y2K HYSTERIA SENDS GROCERY SALES UP: COMMERCE DEPARTMENT

ALISON MAXWELL

WASHINGTON (FNS) -- Paranoia over Y2K sent retail sales at grocery stores skyrocketing in December, according to figures released by the Commerce Department last week.

Sales at grocery stores increased 2.0% in December, after gaining only 0.6% in November. Against December 1998, retail sales were up 7.1%. Drug and proprietary stores also saw dramatic increases in December. For the month sales were up 1.7%, after a 0.2% increase in November. Year-over-year sales were up a whopping 11.7%.

In the general category of food stores, sales also surged 2.0% for the month, after increasing 0.7% in November. For the year sales were up 7.0%.

"The gains in grocery and drug stores were likely because people were stocking up on Y2K items like water and food," said Larry Horowitz, a senior economist with Primark Decision Economics in Boston. "But, we believe these gains might be offset by a drop in sales in January because people don't need to buy as much."

Total 1999 retail sales for food and grocery stores were significantly higher than total 1998 sales, according to the report. Grocery stores raked in a seasonally unadjusted $436.9 billion in 1999 -- a 5.4% increase over 1998's total yearly sales. Food stores sold $461.1 billion worth of merchandise last year, which is a 5.2% increase over 1998. Sales at drug and proprietary stores totaled $118.8 billion -- an 11.3% increase over 1998. Eating and drinking places saw a 7.2% increase over 1998 with sales totaling $285.7 billion.

Overall, retail sales for December were $259.6 billion, an increase of 1.2% from November and up 9.7% from December 1998. Excluding new-car sales, which account for about one-quarter of monthly retail sales, retail sales gained 1.4 percent to $194.7 billion. This was the biggest gain excluding autos since a 1.5% increase in April 1996.

"Holiday 1999 more than met our high expectations," said Rosalind Wells, chief economist for the National Retail Federation. "The significant increases the industry enjoyed this year will be very hard to top, but barring any unforeseen circumstances, we believe retailers will continue to post modest, but solid gains into 2000."

Overall retail sales totaled $3.0 trillion, up 8.9% from 1998.

The robust sales report reinforced economists' beliefs that the Federal Reserve might increase interest rates at its Feb.1 meeting. The Fed increased rates three times last year to keep the economy from overheating.

"This report showed that consumer strength is much greater than expected," Horowitz said. "It blew away all estimates and we predict the momentum in consumer spending will continue throughout the year."