Retail Sales in U.S. Probably Rose for Second Month on Merchant Discounts

Retail sales in the U.S. probably increased in August for a second month as merchants lured shoppers with discounts, a sign the economy will keep expanding, economists said before reports this week.

A projected 0.3 percent gain in sales is based on the median estimate of 63 economists surveyed by Bloomberg News before the Commerce Department’s Sept. 14 report and follows a 0.4 percent rise in July. Other reports may show industrial production cooled and inflation was contained.

Consumers, whose purchases account for about 70 percent of the economy, took advantage of sales and tax-free holidays last month to shop at chains such as Kohl’s Corp. and Ross Stores Inc. The figures underscore the view of Federal Reserve policy makers that while growth has slowed, the recovery isn’t backsliding into a recession.

“It’s a pretty sluggish recovery but at least we have growth,” said James O’Sullivan, chief economist at MF Global Ltd. in New York. “We still have a long way to go. Confidence needs to improve and employment growth needs to accelerate.”

The Commerce Department’s report may show purchases excluding automobiles rose 0.3 percent after a 0.2 percent gain in July, according to the survey median. Sales minus vehicles fell in the previous two months.

Seventeen tax-free holidays in August probably drew more shoppers to malls, where discounts were deeper than those in July, according to Ken Perkins, president of Retail Metrics.

Ross Sales

Pleasanton, California-based Ross, the second-largest U.S. off-price retailer, said sales at stores open at least a year rose 5 percent from August 2009, beating analysts’ forecasts. Kohl’s, a department-store chain based in Menomonee Falls, Wisconsin, reported a 4.5 percent gain, also above projections.

“Our ability to offer terrific bargains on a wide array of product for back-to-school shoppers drove healthy traffic to our stores,” Michael Balmuth, chief executive officer of Ross, said in a statement on Sept. 2.

The Standard & Poor’s Supercomposite Retailing Index of 91 retailers including Target Corp. and Macy’s Inc., has gained 4.7 percent this year, compared with a 0.5 percent decrease in the broader S&P 500 gauge.

Vehicle purchases last month slowed, the retail sales report may show. Toyota Motor Corp., General Motors Co. and Ford Motor Co., the three largest sellers of autos in the U.S., had bigger sales declines compared with August 2009 than analysts forecast.

Industrial Production

Production at factories, mines and utilities rose 0.2 percent last month, according to the survey median before the Fed’s report on Sept. 15. Output jumped 1 percent in July, when automobile production got a boost as fewer factories were closed to retool for new models.

Fed reports from the New York and Philadelphia regions may indicate the pace of manufacturing in August has slowed from earlier in the year.

A survey by 12 regional Fed banks, released Sept. 8, showed that while growth has cooled, the economy isn’t relapsing into a contraction. Five regional banks reported “economic growth at a moderate pace,” and two pointed to “positive developments or net improvements.”

Limited job growth is hampering spending and confidence. The jobless rate will stay above 9 percent through 2011, according to economists surveyed by Bloomberg from Sept. 1 through Sept. 9.

Consumer Confidence

The Thomson Reuters/University of Michigan’s preliminary index of consumer sentiment rose to 70 in September from 68.9, according to the Bloomberg survey median before the Sept. 17 release. The gauge averaged 89 in the five years leading up to the recession that began December 2007.

“Even though the economy is growing again,” President Barack Obama said at the White House on Sept. 10, “the hole the recession left was huge and progress has been painfully slow.”

Obama’s latest proposal would extend middle-income tax cuts while letting the top rates rise. He also wants to spend at least $50 billion as part of a six-year program to rehabilitate transportation infrastructure.

Limited demand is keeping a lid on inflation, a Labor Department report may show on Sept. 17. The consumer price index rose 0.3 percent in August for a second month, according to the Bloomberg survey median.

                        Bloomberg Survey

==============================================================
                        Release    Period    Prior     Median
Indicator                 Date               Value    Forecast
==============================================================
Retail Sales MOM%         9/14      Aug.      0.4%      0.3%
Retail ex-autos MOM%      9/14      Aug.      0.2%      0.3%
Retail exauto/gas MOM%    9/14      Aug.     -0.1%      0.4%
Business Inv. MOM%        9/14      July      0.3%      0.6%
Empire Manu. Index        9/15     Sept.      7.1       8.0
Ind. Prod. MOM%           9/15      Aug.      1.0%      0.2%
PPI  MOM%                 9/16      Aug.      0.2%      0.3%
Core PPI MOM%             9/16      Aug.      0.3%      0.1%
Initial Claims ,000’s     9/16     11-Sep     451       458
Philly Fed Index          9/16     Sept.      -7.7      0.0
CPI  MOM%                 9/17      Aug.      0.3%      0.3%
Core CPI MOM%             9/17      Aug.      0.1%      0.1%
U of Mich Conf. Index     9/17     Aug. F     68.9      70.0
==============================================================

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

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