Retail Sales Probably Fell in September: U.S. Economy Preview

Retail Sales Probably Fell in September: U.S. Economy Preview


Oct. 11 (Bloomberg) -- Retail sales in the U.S. probably fell in September as auto showrooms sat empty after the “cash for clunkers” program expired, economists said before a report this week.

Purchases dropped 2.1 percent, the biggest decrease this year, after rising 2.7 percent in August, according to the median forecast of 56 economists surveyed by Bloomberg News ahead of Commerce Department figures due Oct. 14. Other reports may show inflation and factory production cooled last month.

Plunging auto sales in September are a sign household spending may not be sustained without government incentives as long as unemployment keeps climbing. The financial health of consumers, whose purchases make up the biggest part of the economy, will go a long way in determining when Federal Reserve policy makers raise interest rates again.

“We’re not necessarily going to get huge growth from the consumer,” said Joel Naroff, president of Naroff Economic Advisors Inc. in Holland, Pennsylvania. “Income growth is going to be restrained, and that’s going to translate into modest gains in spending.”

Excluding automobiles, sales probably rose 0.2 percent after a 1.1 percent increase the prior month, according to the Bloomberg survey. The government’s program allowing consumers to trade in older models for new, more fuel-efficient ones ended in late August, translating into a 35 percent drop in auto sales last month. Industry data showed declines at General Motors Co., Toyota Motor Corp. and Ford Motor Co.

Bernanke Pledge

A broad-based increase in sales of other goods would indicate consumers are becoming more confident that the economy is rebounding. A decline would show households are relying on stimulus measures to justify spending.

Fed Chairman Ben S. Bernanke on Oct. 8 said the central bank will be prepared to tighten monetary policy when the outlook for the economy “has improved sufficiently.”

“As economic recovery takes hold, we will need to tighten monetary policy to prevent the emergence of an inflation problem down the road,” Bernanke said in a speech in Washington.

Minutes of the Fed Open Market Committee’s September meeting, scheduled to be released on Oct. 14, may shed more light on policy makers’ assessment of the economy at the time. The Fed last month reiterated its pledge to keep the benchmark lending rate low “for an extended period.”

The Standard & Poor’s 500 Index rallied 4.5 percent last week, its best weekly performance since July, as investors grew more optimistic about the economic recovery. Stocks also rose because Alcoa Inc., the biggest U.S. aluminum producer, kicked off third-quarter earnings season with an unexpected profit.

Retail Earnings

Retailers’ results last week showed sales at chains open at least a year climbed 1.1 percent in September from the same month in 2008, the first year-over-year increase in 13 months, said Swampscott, Massachusetts-based Retail Metrics Inc.

Menomonee Falls, Wisconsin-based Kohl’s Corp., the fourth- largest U.S. department-store chain, raised its profit forecast for the third quarter after comparable sales rose, defying projections of a decrease.

Industrial production expanded by 0.1 percent in September after increasing 0.8 percent the month before, reflecting the end of the clunkers program, according to the survey. The proportion of plant capacity in use, meanwhile, was probably little changed. These figures are due from the Fed on Oct. 16.

Fed Reports

A day earlier, a pair of regional Fed reports may show New York area manufacturing slowed this month after growing in September at the fastest pace in almost two years, while a factory gauge for the Philadelphia region likely dropped from the highest reading since June 2007, economists said.

On Oct. 16, a report may show the Reuters/University of Michigan preliminary index of consumer confidence for October dipped from the highest level since January 2008. The index may slip further: economists surveyed by Bloomberg from Oct. 1 to Oct. 8 projected unemployment would exceed 10 percent in the first quarter of next year.

Levi Strauss & Co., the San Francisco-based closely held maker of blue jeans and Dockers pants, said mounting joblessness cut third-quarter profit and may crimp holiday sales.

“While there’s a general feeling that we’re in a better market today than we were six or nine months ago, there’s still just a huge overhang from unemployment,” Chief Financial Officer Blake Jorgensen said by telephone on Oct. 8. “It’s going to be a slow recovery in 2010.”

The Labor Department on Oct. 15 may report the cost of living in September rose 0.2 percent, half the pace of the prior month, according to the Bloomberg survey.

Economists estimate that prices of goods imported into the U.S., due a day earlier, climbed 0.1 percent last month after a 2 percent gain, indicating inflation remains in check.



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Release Period Prior Median
Indicator Date Value Forecast
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Retail Sales MOM% 10/14 Sept. 2.7% -2.1%
Retail ex-autos MOM% 10/14 Sept. 1.1% 0.2%
Import Prices MOM% 10/14 Sept. 2.0% 0.1%
Import Prices YOY% 10/14 Sept. -15.0% -11.4%
Business Inv. MOM% 10/14 Aug. -1.0% -0.9%
Federal Budget $ Blns 10/13 Sept. 45.7 -67.0
CPI MOM% 10/15 Sept. 0.4% 0.2%
Core CPI MOM% 10/15 Sept. 0.1% 0.1%
CPI YOY% 10/15 Sept. -1.5% -1.4%
Core CPI YOY% 10/15 Sept. 1.4% 1.4%
Initial Claims ,000’s 10/15 10-Oct 521 525
Cont. Claims ,000’s 10/15 3-Oct 6040 6025
Empire Manu. Index 10/15 Oct. 18.9 17.8
Philly Fed Index 10/15 Oct. 14.1 12.0
Net Long Term TICS $ Bl 10/16 Aug. 15.3 30.0
Total TICS $ Blns 10/16 Aug. -97.5 10.0
Ind. Prod. MOM% 10/16 Sept. 0.8% 0.1%
Cap. Util. % 10/16 Sept. 69.6% 69.7%
U of Mich Conf. Index 10/16 Oct. P 73.5 73.0
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