Consternation over retail sales has store managers not only complaining that the Grinch has arrived instead of Santa, but anticipating that the holidays will turn out more blue than green. Looking at government retail sales figures for much of this year, however, things appear somewhat more prosperous. In fact, Commerce Department numbers show a rise, albeit a small one, for much of 1990. That would appear to belie the notion that a recession is under way. The numbers are complicated, though, by a wild card in the government's system: The totals include car and truck sales. Relatively strong vehicle sales have kept the government numbers from descending steeply, even while department stores are being pinched. Get ready for more agonizing as another Commerce report comes out Thursday.
WATCH FOR: A small hop forward in total retail sales during November, to around $155 billion. Don't be surprised if analysts again dismiss that gain as signifying a glass that is half empty, instead of half full.
AFTERTHOUGHT: Certainly, consumers have pruned spending sprees, as confidence in the economy wanes. Overall sales aren't keeping up with the inflation rate. But overbuilding of shopping malls adds to the anxiety that permeates retail sales reports. A parallel dilemma, also reflected in the reaction to the Commerce reports, is overcapacity in the auto industry. Because of Japanese "transplants," analysts believe American car factories are operating at only 60 to 70 percent of capacity.
PROSPECT: "Auto sales have been holding in a range of 6.5 million to 7 million since the autumn, while the auto firms are slashing output to 5.5 million units," says David Hale, economist at Kemper Financial Services Inc. of Chicago. His conclusion: "If consumer demand for autos does not falter, there will be a large production rebound during the first quarter."
NEXT UP: Recession talk won't go away. Expect banks to cut their prime lending rate below 10 percent in coming days. On Friday, the Federal Reserve, eyeing a severe downturn in the nation's job market, allowed the key federal funds rate, which it controls, to decline a quarter-point, to 7.25 percent. Many analysts expect the Fed also to reduce its discount rate, which is at 7 percent.
UPBEAT VIEW: James Howell, former economist for Bank of Boston and president of the Howell Group, told a symposium last week that deep pessimism isn't justified. "Economic forecasts have turned a mild slowdown into a major recession," Howell says. "Economists have been far too negative and have given us a legacy in which we feel bad about the economy." He looks for a short slowdown, provided there is no Mideast war.
EVENTS: The National Association of Purchasing Management tomorrow releases its semiannual forecast. On Thursday, Detroit's automakers report early December car and truck sales.
MORE EVENTS: The Labor Department Friday reports the producer price index, or wholesale prices, for November. Also Friday, the Federal Reserve reports industrial production for November, and Commerce reports business inventories for October.
MARKETS: The Dow Jones industrial average gained 30.45 points last week, closing at 2590.10.