A surge in auto buying helped push retail sales up by 2.3 percent last month, the biggest one-month gain since May, the Commerce Department reported yesterday. The news was not as good last month on the inflation front, however, as sharply higher energy costs contributed to a 0.6 percent increase in producer prices in November.
Auto sales leaped by 10.6 percent from October to November. Domestic cars were selling at an annual rate of 6.8 million in November, the Commerce Department reported. Other retail sales were up by 0.5 percent, with the increases spread across the board. Robert Ortner, chief economist at the Commerce Department, called the November report "pretty encouraging." During October, sales, excluding autos, had only climbed 0.2 percent.
Analysts have been waiting for signs of a pickup in consumer spending, which business hopes will lead the way out of recession. But Ortner said December sales are expected to be depressed by a drop in auto sales. However, the consumer sector as a whole will probably be up in the final three months of the year from the third quarter, he said. The government's initial projection of the fourth quarter gross national product will be available in about 10 days.
The main reason for expecting a recovery is that interest rates have fallen considerably since summer. As a result, housing is also showing signs of improvement. New figures released yesterday by the Mortgage Bankers Association showed that mortgage delinquency rates were down slightly in the third quarter at 5.48 percent, after reaching a record high of 5.56 percent in the second quarter. The association said that, in light of record-high unemployment, it is "surprising and encouraging" that the rate did not increase, but noted it was still higher than the 5.26 percent rate of a year earlier.
The rate of foreclosures increased, however, from 0.58 percent in process in the second quarter to 0.62 percent in the third quarter.
The November producer price rise was "about the same as it was in three of the four preceding months," the Commerce Department said. Although wholesale prices were up only 3.7 percent last month from a year earlier, the monthly pace of this inflation measure has been significantly higher than that since the summer. If producer prices continued to rise for a whole year at the November rate, this would translate into an annual rate increase of 7.9 percent, the BLS said. During 1981, producer prices rose by 7 percent.
Rising energy costs accounted for about half of the total increase in the price index between October and November, the Labor Department reported.
Energy costs were up at all stages in production in the November index, but this largely reflects price increases that actually took place during September and October. Since then home heating oil prices, for example, have begun to drop. Gasoline prices were shown as higher in the November figures only after seasonal adjustment. Pump prices have in fact been declining, but the drop recorded in yesterday's release was less than normal for that month, the Labor Department reported.
Natural gas prices have risen sharply in the past year, and the 5 percent November increase was the steepest one-month gain since February 1980.
There has nevertheless been a marked slowdown in inflation over the past year, which analysts expect will be sustained in 1983. Moderate recovery together with likely increases in productivity "should keep prices down for all of next year," said Jerry Jasinowski, chief economist of the National Association of Manufacturers.
While lower inflation is good news for the consumer it "of course reflects a weak economy which we desperately need to get moving again so that people can return to work," Jasinowski said. The weak economy has encouraged firms to hold down prices in an attempt to raise sales, and has also led to lower wage increases. Inflation, on all measures, has slowed sharply since the recession began in the middle of 1981.
Crude materials prices rose last month by 0.9 percent, the first increase for six months. These prices are generally more sensitive to changes in demand. However, some sensitive industrial prices still declined in November: prices for iron and steel scrap plummeted by 8.2 percent, wastepaper prices moved down more than in the previous two months, and prices for raw cotton and aluminum base scrap declined after increasing in September and October.