SYMBOL LOOKUP
HOME
By Joe Richter
Sept. 28 (Bloomberg) -- Consumer spending in the U.S. probably rose in August, a sign the fallout from a weaker job market and a collapse in subprime lending had yet to reach the biggest part of the economy, a government report may show today.
Purchases increased 0.4 percent for a second month, based on the median forecasts of 76 economists surveyed by Bloomberg News. Incomes rose 0.4 percent after a 0.5 percent July gain, while a measure of inflation slowed, the survey showed.
Lower gasoline prices, auto-dealer discounts and a jump in air-conditioning use during last month's hot spell lifted demand, economists said. Smaller price increases give Federal Reserve policy makers room to reduce interest rates again should job losses and declines in home values lead to a deeper slowdown.
``It looks like spending held up pretty well in August,'' said Robert Mellman, an economist at JPMorgan Chase & Co. in New York. ``We're seeing some slowdown now. Job growth and incomes are probably slowing, and we're starting to see the effects.''
The Commerce Department report is due at 8:30 a.m. in Washington. Spending estimates ranged from gains of 0.2 percent to 0.6 percent.
A report at 9:45 a.m. from the National Association of Purchasing Management-Chicago may show the pace of business activity was little changed this month. The group's barometer fell to 53 from 53.8 in August, according to the Bloomberg survey. Readings greater than 50 signal growth.
Confidence Fragile
A report at 10 a.m. may show consumer confidence held near the lowest level in a year. The Reuters/University of Michigan final sentiment reading rose to 84 this month from 83.4 in August, based on the median estimate of economists. The gauge averaged 89.6 in the first half of 2007.
The decline in confidence hasn't translated into a collapse in spending, which makes up more than two-thirds of the economy. So far, wage gains have helped shield consumers from the effects of a worsening real-estate recession.
Retail sales in August rose 0.3 percent after a 0.5 percent gain the prior month, according to a Commerce Department report Sept. 14. Receipts at automobile dealerships and parts stores rose the most since July 2006, the report showed.
Union, New Jersey-based Bed Bath & Beyond Inc., the largest U.S. home-furnishings retailer, this week said second-quarter profit rose more than analysts estimated after it lowered prices to lure in customers.
Inflation Cools
The Commerce Department figures today may reflect the increase in discounting. The report's price gauge tied to spending patterns and excluding food and energy costs, the Fed's preferred measure, probably rose 0.1 percent for a second month, according to the Bloomberg survey. It rose 1.8 percent from August 2006, the smallest gain since 2004, the survey showed.
Economists foresee lower sales by year-end. The economy lost jobs last month for the first time in four years and defaults among subprime borrowers have jumped, prompting banks to boost borrowing rates and make it more difficult to get loans. Home-price declines also mean fewer owners can tap into equity for extra cash.
The sell-off in credit markets may make the ``housing correction more severe and it may have other effects on the economy,'' Fed Chairman Ben S. Bernanke said in congressional testimony on Sept. 20. The central bank two days earlier lowered its benchmark interest rate for the first time in four years.
A Sept. 25 report from the International Council of Shopping Centers and UBS Securities LLC showed retail sales at stores open at least a year fell 1 percent last week from the previous week, the second straight decline. Lowe's Cos. and Target Corp. this week cut their earnings forecasts.
Consumer spending will probably grow at a 2.25 percent average annual pace in the second half of 2007, compared with a 2.55 percent rate from January through June, based on the median in a Bloomberg survey of economists Aug. 30 to Sept. 7. Quarterly gains averaged 3.7 percent in the last decade.
The economy will grow 2 percent this year, the least since 2002, according to the Bloomberg survey.
Bloomberg Survey
FIRM Personal Personal Chicago U of M
Income Spending PM Conf.
------------------------------------------------------------
Number of replies 72 76 59 58
MEDIAN 0.4% 0.4% 53.0 84.0
AVERAGE 0.4% 0.4% 53.3 84.2
High Forecast 0.5% 0.6% 56.0 88.0
Low Forecast 0.1% 0.2% 50.0 82.0
Previous 0.5% 0.4% 53.8 83.8
------------------------------------------------------------
4CAST Ltd. 0.3% 0.4% 55.0 85.0
Action Economics 0.4% 0.4% 54.0 83.8
AIG Global Invest. 0.4% 0.2% 55.0 84.5
Alleti Gestielle SGR 0.3% 0.4% 53.5 84.2
Allianz Dresdner 0.4% 0.3% n/a n/a
Argus Research 0.3% 0.3% 53.0 85.0
BBVA 0.3% 0.4% 53.0 83.0
BMO Capital Markets 0.4% 0.4% 53.0 84.0
BNP Paribas 0.2% 0.3% 52.0 82.7
B of A Securities 0.3% 0.4% 51.5 n/a
Banca IMI n/a n/a n/a 84.5
Bantleon Bank AG 0.4% 0.3% 55.0 84.0
Barclays Capital 0.3% 0.5% 55.0 84.5
Bear Stearns 0.2% 0.2% 54.5 n/a
BOT- Mitsubishi 0.3% 0.6% 54.1 84.0
Briefing.com 0.4% 0.4% 55.0 83.8
Calyon 0.4% 0.3% 53.0 83.5
CFC Group 0.4% 0.3% 53.4 84.3
CIBC World Markets 0.4% 0.4% n/a 84.3
Citigroup 0.3% 0.3% 55.0 85.0
ClearView Economics 0.3% 0.4% n/a n/a
Commerzbank 0.4% 0.4% 50.0 84.0
Credit Suisse 0.4% 0.5% 56.0 84.0
Daiwa Securities 0.4% 0.5% n/a n/a
DekaBank 0.4% 0.4% 53.0 84.5
Desjardins Group 0.4% 0.4% 52.5 83.8
Deutsche Bank 0.4% 0.3% 52.5 85.0
Deutsche PostBank n/a 0.4% n/a 83.8
Dresdner Kleinwort n/a 0.3% 53.5 84.3
DZ Bank 0.4% 0.4% 52.9 84.0
FTN Financial 0.2% 0.2% 52.0 82.0
First Trust Advisors 0.3% 0.5% 52.9 84.0
Fortis n/a 0.3% 54.0 83.8
Global Insight 0.4% 0.5% n/a 85.0
Goldman Sachs 0.5% 0.2% 53.0 n/a
H&R Block Financial 0.4% 0.3% 52.0 85.0
High Frequency 0.3% 0.2% 52.5 83.5
HBOS Treasury 0.3% 0.2% 52.0 n/a
HSH Nordbank AG 0.4% 0.3% 52.5 83.0
Horizon Investments 0.3% 0.2% 54.5 n/a
IDEAglobal 0.4% 0.4% 52.0 84.0
ING Barings 0.4% 0.4% 51.0 82.0
Informa Global 0.4% 0.3% 52.5 n/a
Insight Economics 0.3% 0.6% 52.5 85.0
Intesa-SanPaulo 0.3% 0.4% 53.0 84.0
J.P. Morgan Chase 0.4% 0.4% 52.0 84.0
JPMorgan Private 0.4% 0.4% 53.2 83.0
Janney Montgomery n/a 0.2% 53.0 n/a
Landesbank Berlin 0.4% 0.4% 56.0 85.0
Lehman 0.3% 0.4% 53.5 84.5
Lloyds TSB 0.4% 0.4% 54.2 84.5
Maria Fiorini 0.4% 0.4% n/a n/a
Merrill Lynch 0.4% 0.5% 53.0 85.0
Mizuho Securities 0.4% 0.2% 50.0 n/a
Moody's Economy.com 0.3% 0.3% 54.0 84.0
Morgan Stanley 0.4% 0.4% n/a n/a
National Bank Fin. 0.1% n/a n/a 83.5
National City Bank 0.4% 0.2% 54.0 84.3
Natixis 0.4% 0.2% n/a n/a
Nord/LB 0.4% 0.4% 53.5 84.5
PNC Bank 0.4% 0.2% n/a n/a
Putnam 0.4% 0.4% n/a n/a
RBS Greenwich Cap. 0.4% 0.4% n/a 85.0
Ried, Thunberg n/a 0.5% 54.0 85.0
Scotia Capital 0.4% 0.3% 54.0 85.0
Societe Generale 0.4% 0.4% 53.0 85.0
State Street 0.4% 0.4% n/a n/a
Stone & McCarthy 0.4% 0.5% 52.5 84.0
TD Securities 0.3% 0.3% n/a n/a
Thomson/IFR 0.4% 0.5% 52.7 83.5
UBS Securities LLC 0.4% 0.3% 53.0 84.0
Unicredit- UBM 0.4% 0.4% n/a 88.0
Univ. of MD 0.3% 0.3% 53.0 84.0
Wachovia 0.2% 0.3% n/a n/a
Wells Fargo 0.4% 0.4% n/a n/a
WestLB AG 0.4% 0.4% 53.4 83.9
Westpac Banking 0.3% 0.3% 54.0 85.0
Wrightson 0.4% 0.4% 55.0 84.0
To contact the reporter on this story: Joe Richter in Washington at jrichter1@bloomberg.net
Last Updated: September 28, 2007 00:07 EDT
