Retail Sales in U.S. Probably Climbed as Incentives Propelled Auto Demand

Retail Sales in U.S. Probably Climbed as Incentives Propelled Auto Demand

U.S. retail sales probably rose in July for the first time in three months as incentives spurred auto purchases, indicating merchants are relying on discounts to spark demand, economists said before reports this week.

The 0.5 percent increase in sales followed a 0.5 percent June decline, according to the median estimate of 58 economists surveyed by Bloomberg News before Commerce Department figures Aug. 13. Other reports may show consumer prices were restrained and the trade gap was little changed.

Companies added fewer workers than forecast last month, pointing to a pace of recovery in the labor market that will do little to boost consumer spending, which accounts for 70 percent of the economy. Federal Reserve Chairman Ben S. Bernanke and fellow central bankers will take into consideration the mounting signs of slower growth when they meet in two days.

“Consumer spending is going to be touch-and-go all quarter,” said Ryan Sweet, a senior economist at Moody’s Economy.com in West Chester, Pennsylvania. “Vehicle sales got off to a decent start but outside of autos, spending was generally weak in July.”

The Commerce Department’s report will show purchases excluding automobiles rose 0.3 percent last month, according to the survey median. Sales minus vehicles fell 0.1 percent in June and 1.2 percent the previous month.

Retailers reported July sales gains that missed analysts’ estimates as consumers cut spending ahead of the back-to-school season. Sales at 30 chains climbed 3 percent from a year earlier, less than the 3.2 percent average of analyst projections, Retail Metrics Inc. said last week. Department- store chain J.C. Penney Co.’s sales fell 0.6 percent.

Summer Merchandise

July is typically the slowest month of the third quarter for retailers as they clear out summer merchandise for the back- to-school season, the second-largest sales period after the year-end holidays.

Americans had already slowed their spending last quarter. Purchases rose at a 1.6 percent annual rate, less than the 1.9 percent in the first three months of the year, Commerce Department figures showed on July 30. The economy also cooled, growing 2.4 percent after a 3.7 percent pace from January through March.

The Standard & Poor’s Supercomposite Retailing Index of 90 retailers including Target Corp. and Macy’s Inc., is down 16 percent from this year’s peak on April 26. The broader S&P 500 has fallen 7.9 percent from its April 23 high.

“The economic environment remains uneven” and “card members are borrowing less and paying down more of their outstanding debt,” Kenneth I. Chenault, chairman and chief executive officer of American Express Co., the biggest U.S. credit card issuer by purchases, said in a July 22 statement.

Auto Sales

One source of strength for the Commerce Department’s retail figures may be car sales. Vehicle purchases rose to an 11.56 million annual rate in July, the third-highest this year, as model-year closeout deals drew customers back to showrooms. Demand would be up from an 11.08 million pace the prior month, according to industry data.

“We had an outstanding retail month from a consumer standpoint,” George Pipas, chief U.S. sales analyst for Ford Motor Co., said in an interview last week with Bloomberg Television. “Still, it is a fragile situation.”

Economic data pointing to slower growth have intensified debate among economists whether the Fed will take an incremental step at their Aug. 10 policy meeting toward providing more stimulus.

Bernanke on Economy

“The slow recovery in the labor market and the attendant uncertainty about job prospects are weighing on household confidence and spending,” Bernanke said last week in a speech in Charleston, South Carolina. While the U.S. has “a considerable way to go” for a full recovery, “rising demand from households and businesses should help sustain growth.”

Companies added 71,000 jobs in July after a gain of 31,000 the prior month that was smaller than initially estimated, Labor Department figures showed. Total employment fell 131,000, reflecting the dismissal of temporary government workers as the decennial census wound down, the Labor Department reported Aug. 6.

Central bankers are facing little risk of inflation. The Labor Department may report Aug. 13 that consumer prices increased 0.2 percent in July from the prior month, while prices excluding food and energy rose 0.1 percent, according to the median estimate in a Bloomberg survey.

A report from the Commerce Department on Aug. 11 may show the U.S. trade deficit held at $42.3 billion in June, according to the Bloomberg survey. Imports may have increased as companies spent more on capital goods and boosted inventories, while exports probably also picked up.

Bloomberg Survey

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Release Period Prior Median
Indicator Date Value Forecast
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Productivity QOQ% 8/10 1Q 2.8% 0.2%
Labor Costs QOQ% 8/10 1Q P -1.3% 1.5%
Whlsale Inv. MOM% 8/10 June 0.5% 0.4%
Trade Balance $ Blns 8/11 June -42.3 -42.3
Federal Budget $ Blns 8/11 July -180.7 -169.0
Initial Claims ,000’s 8/12 7-Aug 479 465
Cont. Claims ,000’s 8/12 31-Jul 4537 4540
Import Prices MOM% 8/12 July -1.3% 0.4%
Import Prices YOY% 8/12 July 4.5% 5.3%
CPI MOM% 8/13 July -0.1% 0.2%
Core CPI MOM% 8/13 July 0.2% 0.1%
CPI YOY% 8/13 July 1.1% 1.2%
Core CPI YOY% 8/13 July 0.9% 0.9%
Retail Sales MOM% 8/13 July -0.5% 0.5%
Retail ex-autos MOM% 8/13 July -0.1% 0.3%
Retail exauto/gas MOM% 8/13 July 0.1% 0.3%
U of Mich Conf. Index 8/13 Aug. P 67.8 69.4
Business Inv. MOM% 8/13 June 0.1% 0.2%
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source: bloomberg.com