U.S. Retail Sales Probably Fell in January for a Second Month

U.S. Retail Sales Probably Fell in January for a Second Month

Feb. 13 (Bloomberg) -- Retail sales in the U.S. probably fell in January for a second month as falling home prices discouraged consumer spending, a sign the biggest part of the economy is starting to falter, economists said before a government report today.

Sales dropped 0.3 percent after falling 0.4 percent in December, according to the median estimate in a Bloomberg News survey of 81 economists. It would be the first back-to-back decline since 2003.

Americans are spending less on cars and furniture as the real-estate slump erodes the value of their homes, adding to concern that sustained declines in consumer purchases will end the economic expansion. Federal Reserve Chairman Ben S. Bernanke will likely cut interest rates further as risks to growth escalate, economists said.

``Consumer spending continues to lose momentum,'' said Brian Bethune, an economist at Global Insight Inc. in Lexington, Massachusetts. The figures ``reinforce the picture of an economy that has run of out steam in the early months of 2008.''

The Commerce Department will report retail sales at 8:30 a.m. in Washington today. Economists' forecasts ranged from a decline of 1.2 percent to a gain of 0.3 percent.

Business Inventories

At 10 a.m., Commerce will report that businesses' inventories grew 0.5 percent in December as sales declined, according to the Bloomberg survey median. The increase, following a 0.4 percent gain in November, raises the possibility merchants will place fewer orders as demand slows.

Consumers, whose spending accounts for more than two-thirds of the economy, are facing the worst housing slump in a quarter century at the same time that access to credit is becoming more difficult. The economy lost 17,000 jobs in January, the first drop in more than four years. The Standard & Poor's 500 Index has fallen three consecutive months, the longest losing streak since 2003.

Auto dealers are among retailers taking a hit. Cars and light trucks sold last month at a 15.2 million annual pace, down 6.7 percent from December. Auto industry sales this year are forecast to drop to the lowest level since 1998.

AutoNation Inc., the largest publicly traded U.S. car dealer, said fourth-quarter profit dropped to a six-year low as cooling economies in California and Florida, two states bearing the brunt of the housing slump, hurt sales.

`Brutal'

``The first half of the year will be brutal,'' Chief Executive Officer Michael Jackson said in a Feb. 7 interview.

The retail report may show purchases excluding automobiles rose 0.2 percent in January, after a 0.4 percent drop in December, according to the Bloomberg median. An increase in receipts at service stations because of higher gasoline prices probably contributed to the gain, economists said.

Industry reports showed January sales fell at stores from Target Corp. to Nordstrom Inc. even as some retailers slashed prices by as much as 75 percent. Sales at stores open at least a year rose 0.5 percent from a year earlier, the worst January since 1970, according to the International Council of Shopping Centers.

The industry figures account for about 17 percent of total retail sales, which make up almost half of consumer spending. Retailers' January results followed the worst holiday shopping season since 2002, according to ICSC.

Consumers are increasingly limiting expenses to those they can't avoid. The amount Americans must spend each month on debt service, housing, medical costs, and food and energy bills rose to 66.9 percent of their total spending in December, the highest since records began in 1980, according to Bloomberg figures.

A U.S. recession over the next 12 months is now an even bet, according to a Bloomberg survey of economists taken from Jan. 30 to Feb. 7. The odds of a recession rose from 40 percent in January.

BLOOMBERG