Retail Sales Probably Rose at Slower Pace as U.S. Companies Slowed Hiring

Retail Sales Probably Rose at Slower Pace as U.S. Companies Slowed Hiring

June 4 (Bloomberg) -- Jim Bianco, president of Bianco Research LLC, talks with Bloomberg's Betty Liu about the May U.S. employment report released today and its impact on financial markets. Employers in the U.S. hired fewer workers in May than forecast and Americans dropped out of the labor force, showing a lack of confidence in the recovery that may lead to slower economic growth. (Source: Bloomberg)
Sales at U.S. retailers grew in May at the slowest pace of the year, pointing to a deceleration in demand that may further restrain employment, economists said before reports this week.

Purchases increased 0.2 percent following a 0.4 percent April gain, according to the median estimate of 58 economists surveyed by Bloomberg News before Commerce Department figures on June 11. Other reports may show the trade gap widened and consumer confidence rose.

Companies pulled back on hiring last month, making it likely consumers will continue to keep a lid on spending, which accounts for about 70 percent of the economy. Discounters Target Corp. and TJX Cos. were among merchants reporting gains in May sales, indicating households are looking for bargains to stretch out their paychecks.

“Consumer spending can only grow at a modest pace, in fits and starts,” said Josh Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York. “We’re not going to get a sharp rebound in jobs and therefore income is only going to grow at a modest pace.”

Employers excluding government agencies added 41,000 workers to payrolls last month following a 218,000 increase in April, the Labor Department reported last week. Total payrolls rose by 431,000 as the federal government hired 411,000 temporary workers to help conduct the census. These employees will be dismissed over the next few months as the decennial population count is completed.

Less Broad-Based

The increase in May sales may also have been less broad- based than in prior months. Purchases at 30 chains rose 2.7 percent from a year earlier, less than a 2.9 percent projected gain, Retail Metrics said last week.

Consumers sought discounts after unemployment rose in April and the sovereign-debt crisis in Europe intensified. Sales at Target, the second largest U.S. discount retailer, rose 1.3 percent in stores open at least a year.

“Comparable-store sales were somewhat below our expectation,” said Gregg Steinhafel, chief executive officer of Target, in a statement May 19. “Our recent experience reinforces our belief that we will continue to experience volatility in the pace of economic recovery.”

One source of strength for the retail figures may be car sales. Vehicle demand rose to an 11.64 million annual rate in May, the second-highest this year, from an 11.21 million pace in April, according to industry data.

Debt Crisis

The debt crisis in Europe raises the risk that tumbling stock prices may give households another reason to rein in spending. Shares have been pummeled since the crisis intensified, with the Standard & Poor’s 500 Index dropping 13 percent since reaching a 19-month high on April 23.

Also this week, Federal Reserve Chairman Ben S. Bernanke will testify about the state of the economy before the House Budget Committee on June 9. Bernanke last week said joblessness was among the “important concerns” for the recovery.

Another report this week may show the European debt crisis so far has had little effect on consumer confidence. The Thomson Reuters/University of Michigan preliminary consumer sentiment index for June increased to 74.6 from 73.6 at the end of last month, according to the median estimate of economists surveyed before the June 11 release.

The need to replenish depleted inventories, combined with rising business spending and exports, is giving factories a lift. Stockpiles at U.S. businesses rose 0.5 percent in April, a fourth consecutive gain, economists said ahead of a Commerce Department report on June 11.

The rebound in economic growth earlier this year has pushed up imports faster than exports, another report from the Commerce Department will show on June 10. The trade deficit in April probably rose to $41 billion, the most since December 2008, from $40.4 billion the prior month, according to the median estimate of economists surveyed.

Bloomberg Survey

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Release Period Prior Median
Indicator Date Value Forecast
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Cons. Credit $ Blns 6/7 April 2.0 -2.0
Whlsale Inv. MOM% 6/9 April 0.4% 0.5%
MBA Mortgage Applications 6/9 5-Jun 0.9% n/a
Trade Balance $ Blns 6/10 April -40.4 -41.0
Initial Claims ,000’s 6/10 5-Jun 453 448
Federal Budget $ Blns 6/10 May -189.7 -140.0
Retail Sales MOM% 6/11 May 0.4% 0.2%
Retail ex-autos MOM% 6/11 May 0.4% 0.1%
Retail exauto/gas MOM% 6/11 May 0.4% 0.3%
U of Mich Conf. Index 6/11 June P 73.6 74.6
Business Inv. MOM% 6/11 April 0.4% 0.5%
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source: bloomberg.com