Retail Sales Probably Rose on Auto Demand

Retail Sales Probably Rose on Auto Demand

Retail sales in the U.S. probably increased in July by the most in four months as automobile purchases rebounded, economists said before a report this week.

The projected 0.5 percent gain in purchases would follow a 0.1 percent increase in June, according to the median forecast of 61 economists surveyed by Bloomberg News ahead of Commerce Department figures on Aug. 12. A report the day before may show the trade deficit narrowed.

A pickup in hiring and earnings last month may keep giving consumers the confidence to visit car dealer showrooms and shop at stores like Macy’s Inc., providing a boost for the biggest part of the economy. Federal Reserve policy makers will meet this week to debate what to do next following recent signs of a more pronounced U.S. economic slowdown and European debt woes that battered the stock market.

“We saw a modest pickup in July auto sales, gasoline prices have retreated from their peaks and things are a touch better for retailers, which should make sales perk up,” said Ken Mayland, president of ClearView Economics LLC in Pepper Pike, Ohio. “To really reinvigorate consumer spending, we have to get more jobs.”

Cars and light trucks sold at a seasonally adjusted pace of 12.2 million in July, up from 11.4 million in June and higher than analysts’ estimates. Deliveries at Detroit-based General Motors Co. climbed 7.6 percent from the same month in 2010 to 214,915.

Losing Momentum
“Although the economy has clearly lost some momentum, we do believe that it will continue to recover, but more gradually than we had originally anticipated as we move through the second half of the year,” Don Johnson, GM’s vice president of U.S. sales, said on an Aug. 2 conference call. Moderating gas prices have “provided some needed relief to consumers.”

The economy expanded at a 1.3 percent annual rate in the second quarter of 2011, less than forecast, from a 0.4 percent pace in the first three months of the year, Commerce Department figures showed. Household spending rose at 0.1 percent pace in the second quarter, the weakest since the same period in 2009.

Fed policy makers may address chances of further slowdown when the Federal Open Market Committee releases a statement on Aug. 9. Chairman Ben S. Bernanke told Congress on July 14 that central bank officials want to see if the economy rebounds as anticipated in the coming months, and that they are keeping a close eye on inflation.

The Standard & Poor’s 500 Index suffered its worst weekly slump since 2008, falling 7.2 percent. Investors fretted that the world’s largest economy was at risk of falling back into a recession.

More Hiring
Employment prospects that brightened in July may support the Fed’s view that the economy will improve. Payrolls grew by 117,000 last month after increasing a revised 46,000 in June, the Labor Department reported on Aug. 5. The jobless rate fell to 9.1 percent in July from 9.2 percent, the first decrease in four months, a separate survey of households showed.

Excluding automobiles and service stations, the retail report may also show sales rose 0.2 percent for a fourth straight month in July, economists said.

Retailers, including Macy’s and Limited Brands Inc., reported July sales that exceeded analysts’ estimates. Purchases at Macy’s rose 5 percent, surpassing the 4.4 percent average projection compiled by Retail Metrics Inc. Limited, operator of the Victoria’s Secret chain, posted a gain of 6 percent.

Export growth may also support American companies as a weak dollar makes U.S.-made goods more attractive to overseas buyers. The trade gap shrank in June to $48 billion from the $50.2 billion deficit the prior month that was the widest since October 2008, according to economists’ median estimate ahead of the Commerce Department figures due Aug. 11.

The U.S. currency dropped 7.4 percent in the 12-months ended July against a weighted basket of currencies from the country’s biggest trading partners.

Bloomberg Survey

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Release Period Prior Median
Indicator Date Value Forecast
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Productivity QOQ% 8/9 2Q 1.8% -0.8%
Labor Costs QOQ% 8/9 2Q P 0.7% 2.4%
Trade Balance $ Blns 8/11 June -50.2 -48.0
Initial Claims ,000’s 8/11 6-Aug 400 401
Retail Sales MOM% 8/12 July 0.1% 0.5%
Retail ex-autos MOM% 8/12 July 0.0% 0.2%
Retail exauto/gas MOM% 8/12 July 0.2% 0.2%
U of Mich Conf. Index 8/12 Aug. P 63.7 63.0
Business Inv. MOM% 8/12 June 1.0% 0.6%
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source: bloomberg.com