Autos drive retail sales in July

WASHINGTON -- Sales incentives at auto dealerships sent retail sales up in July despite lackluster demand at department stores and other retail establishments.

The Commerce Department reported yesterday that total retail sales rose by 1.8 percent, the best showing in three months, but almost all of that strength came from auto sales, which soared 6.7 percent.

That was their biggest one-month increase since October 2001, when automakers had also strengthened their incentive programs to keep demand from faltering after the Sept. 11 terror attacks.

Excluding autos, retail sales were up a smaller 0.3 percent in July, just half the gain economists had been expecting.

''Maybe people were tapped out after spending so much money earlier in the summer and at the dealerships, but this was not a great report for most retailers," said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pa.

While some economists worried that consumers will start to cut back because of soaring energy prices, which set a closing record of $65.80 yesterday, others said strong job gains should provide support for spending in the months ahead.

''With consumers likely to return to the malls from the auto showrooms, spending in other areas will pick up again, especially once cooler weather arrives to give a boost to fall clothing," predicted Nigel Gault, chief US economist at Global Insight, an economic forecasting firm in Lexington.

Wall Street focused on positive economic news rather than soaring oil prices to push the Dow Jones industrial average up 91.48 points yesterday to close at 10,685.89.

In other economic news, inventories held by businesses on shelves and backlots were unchanged in June, marking the first time inventory levels had failed to increase in nine months, the Commerce Department reported.