Retail Sales Probably Rose for Sixth Month as Consumers Join U.S. Recovery

Retail sales probably climbed for a sixth month in December, a sign consumers are contributing more to the U.S. expansion even as the labor market struggles to accelerate, economists said before a report this week.

The projected 0.8 percent gain in purchases would match the previous month’s increase, according to the median of 58 estimates in a Bloomberg News survey ahead of Commerce Department figures Jan. 14. Other reports may show industrial production advanced, while inflation remained muted.

Generating stronger demand at retailers such as Gap Inc. and Target Corp. may require bigger job gains. An unemployment rate that’s exceeded 9 percent for 20 straight months remains a concern of Federal Reserve Chairman Ben S. Bernanke and his fellow policy makers.

“When you combine improving economic fundamentals with a large amount of pent-up demand, that points to ongoing strength in retail sales,” said Robert Dye, a senior economist at PNC Financial Services Group Inc. in Pittsburgh. “We would need stronger job growth” for consumers to “lead the economy,” he said.

Consumer spending, which accounts for about 70 percent of the economy, has picked up. Holiday purchases rose 5.5 percent, the best performance since 2005, said MasterCard Advisors’ SpendingPulse, which measures retail sales by all payment forms. That compared with a 4.1 percent gain a year earlier. The numbers include Internet sales and exclude automobile purchases.

Northeast Snow

Some retailers’ sales fell short of analysts’ projections last month as a blizzard the day after Christmas kept shoppers from stores, overshadowing earlier holiday buying.

A Dec. 26 storm that dumped more than 12 inches (30 centimeters) of snow on parts of the Northeast “disrupted” post-holiday shopping, Macy’s Inc. Chief Executive Officer Terry Lundgren said in a statement. The day after Christmas is typically one of the busiest shopping days of the year.

Sales at stores open more than a year at Gap, the largest U.S. apparel retailer, declined 3 percent, compared with the 2.4 percent average increase indicated by analyst estimates compiled by Retail Metrics Inc. Macy’s, Target and American Eagle Outfitters Inc. also trailed projections.

Retailers may benefit from a rise in consumer confidence. The Thomson Reuters/University of Michigan preliminary sentiment index rose this month to the highest level since June, according to the survey median before the Jan. 14 report. The optimism may reflect in part stock market gains and President Barack Obama’s deal with Republican leaders to keep tax rates from rising this year.

Retailer Shares

Investors are driving up retailer shares as spending picks up. The Standard & Poor’s Supercomposite Retailing Index has gained 30 percent since June 30, 2010, compared with a 23 percent advance for the broader S&P 500.

Production at factories, mines and utilities rose 0.5 percent last month, the most since July, according to the survey median before the Fed’s report on Jan. 14. Carmakers decreased output by 6 percent in November, even as demand climbed, indicating production may have rebounded a month later.

Auto sales in December reached a 12.53 million annual pace, the highest since the government’s so-called cash-for-clunkers incentive program in August 2009, according to industry data.

Fed Chairman Ben S. Bernanke last week reiterated the central bank will buy an additional $600 billion of Treasuries through June in an effort to trim joblessness and avert deflation, or an extended drop in prices.

Bernanke Testimony

“In a situation in which unemployment is high and expected to remain so and inflation is unusually low,” the Federal Open Market Committee “would normally respond by reducing its target for the federal funds rate,” Bernanke said Jan. 7 during testimony before lawmakers in Washington.

Instead, with the rate close to zero since December 2008, the Fed is buying securities in an effort to keep market borrowing costs low, he said.

Consumer prices advanced 0.4 percent in December after rising 0.1 percent the previous month, according to the Bloomberg survey median ahead of a Labor Department report Jan. 14. Excluding food and fuel costs, core prices were up 0.1 percent for a second month.

A report from the Commerce Department on Jan. 13 may show the trade deficit in the U.S. widened to $40.9 billion in November after falling to a nine-month low the prior month, according to the survey median.

The price of goods imported into the U.S. probably climbed 1.2 percent last month, compared with a 1.3 percent rise in November, economists said ahead of Jan. 12 figures from the Labor Department.

                     Bloomberg Survey

================================================================
                        Release    Period    Prior     Median
Indicator                 Date               Value    Forecast
================================================================
Import Prices MOM%        1/12      Dec.      1.3%      1.2%
Import Prices YOY%        1/12      Dec.      3.7%      4.7%
Federal Budget $ Blns     1/12      Dec.     -91.4     -84.0
Trade Balance $ Blns      1/13      Nov.     -38.7     -40.9
PPI  MOM%                 1/13      Dec.      0.8%      0.8%
Core PPI MOM%             1/13      Dec.      0.3%      0.2%
PPI  YOY%                 1/13      Dec.      3.5%      3.8%
Core PPI YOY%             1/13      Dec.      1.2%      1.4%
Initial Claims ,000’s     1/13     8-Jan      409       406
Cont. Claims ,000’s       1/13     1-Jan      4103      4090
CPI  MOM%                 1/14      Dec.      0.1%      0.4%
Core CPI MOM%             1/14      Dec.      0.1%      0.1%
CPI  YOY%                 1/14      Dec.      1.1%      1.3%
Core CPI YOY%             1/14      Dec.      0.8%      0.7%
Core CPI SA Index         1/14      Dec.    221.982   222.200
CPI NSA Index             1/14      Dec.    218.803   219.022
Retail Sales MOM%         1/14      Dec.      0.8%      0.8%
Retail ex-autos MOM%      1/14      Dec.      1.2%      0.7%
Retail exauto/gas MOM%    1/14      Dec.      0.8%      0.4%
Ind. Prod. MOM%           1/14      Dec.      0.4%      0.5%
Cap. Util. %              1/14      Dec.     75.2%     75.6%
U of Mich Conf. Index     1/14     Jan. P     74.5      75.5
Business Inv. MOM%        1/14      Nov.      0.7%      0.7%
================================================================

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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