Retail Sales Probably Increased: U.S. Economy Preview

Retail Sales Probably Increased: U.S. Economy Preview


Dec. 9 (Bloomberg) -- Sales at U.S. retailers probably rose in November as discounts and wage gains helped Americans cope with near-record fuel costs, economists said before reports this week.

Purchases rose 0.6 percent after increasing 0.2 percent in October, according to the median estimate in a Bloomberg News survey before a Dec. 13 Commerce Department report. Figures from the Labor Department may show consumer and wholesale prices increased, propelled by bigger energy bills.

The National Retail Federation predicts the holiday shopping season will be the slowest in five years. Job and income gains may cushion the blow of $3-a-gallon gasoline and lower property values, preventing a collapse of consumer demand.

``The job market is still providing important support for consumer spending,'' said Dean Maki, chief U.S. economist at Barclays Capital in New York.

Federal Reserve policy makers, meeting this week, will likely trim interest rates again as they try to keep the economy from stalling, economists said.

Purchases excluding automobiles increased 0.6 percent after a 0.2 percent October gain, according to the median forecast in the Bloomberg survey.

Employers hired more workers than forecast in November and the jobless rate was unchanged, the Labor Department reported last week. The figures eased concern one of the few remaining pillars of support for spending was being undermined. Hourly wages also rose more than economists forecast.

Another report last week showed U.S. retailers' sales in November rose more than the International Council of Shopping Centers had estimated.

More Discounts

Bentonville, Arkansas-based Wal-Mart Stores Inc., the world's largest retailer, said November sales rose as shoppers stocked up on food and gifts for the holidays. Wal-Mart increased post-Thanksgiving discounts to lure shoppers burdened by rising gasoline and food costs and higher rates on their mortgages.

Still, there are signs that demand for non-essential items, such as furniture and automobiles, is cooling as higher gasoline and home-heating bills siphon cash away from Americans' bank accounts, while lower property values make it harder for owners to tap home equity.

``Energy-price increases underscore the hit to discretionary spending,'' said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York.

A government report last week showed consumer spending in October rose less than economists had forecast, and the National Retail Federation projects November and December sales will rise 4 percent, the smallest gain since 2002. That year sales added 1.3 percent.

Housing to Worsen

Adding to the challenges for the consumer are signs that housing's woes may deepen. The number of Americans signing contracts to buy previously owned homes fell 1 percent in October, a report from the National Association of Realtors tomorrow may show.

Prices paid by consumers rose 0.6 percent in November after a 0.3 percent gain, economists project a Labor Department report Dec. 14 may show. Excluding food and energy, so-called core prices probably increased 0.2 percent for a sixth month.

A day earlier, the department's report on producer prices may show a 1.5 percent November jump in wholesale costs after a 0.1 percent increase a month earlier, according to the Bloomberg survey median.

United Airlines Inc., Delta Air Lines Inc., Continental Airlines Inc. and Southwest Airlines Co. cut 2008 U.S. capacity plans amid growing concern over rising oil prices and a weakening economy.

Growing `Concerned'

``We are concerned about growing evidence of slowing economic growth that would inevitably affect passenger demand, coupled with a surge in energy prices,'' Southwest Chief Executive Officer Gary Kelly said in a statement on Dec. 4.

The economy will grow at an annual rate of 1.5 percent from October through December, down from a 4.9 percent third-quarter pace, based on the median estimate of economists surveyed by Bloomberg News last month.

The slowdown may be more severe, according to Martin Feldstein, who heads the National Bureau of Economic Research, the private research group that dates U.S. economic cycles. Growth this quarter could be less than 1 percent, or even negative, Feldstein said in an interview.

Fed policy makers are forecast to lower their benchmark rate by a quarter percentage point to 4.25 percent when they meet Dec. 11 in Washington. Officials have reduced the rate by 0.75 percentage point over the past two meetings.

In other reports this week, Commerce Department figures may show the U.S. trade deficit widened to $57.3 billion in October, from $56.5 billion. The deficit has narrowed for four straight months on record exports. The report is set for Dec. 12.

That same day, the Labor Department will report that prices of goods imported in to the U.S. rose 2 percent in November after a 1.8 percent increase the prior month, based the survey median.

BLOOMBERG