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U.S. Consumer Spending Probably Climbed in July as Car Purchases Rebounded

U.S. consumer spending probably climbed in July on the heels of the first drop in almost two years, a rebound that may prove short-lived as employment wanes and confidence sinks, economists said before a report today.

Purchases rose 0.5 percent after a 0.2 percent decline the prior month, according to the median estimate of 64 economists surveyed by Bloomberg News. Another report may show contract signings for sales of existing homes fell last month.

Autos sold at the fastest pace in three months as supply constraints from Japan’s March earthquake began to ease. Spending may cool after wrangling over the federal budget, the first U.S. credit-rating downgrade in history and growing concern over a debt crisis in Europe sent the Standard & Poor’s 500 Index down 17 percent from July 22 through Aug. 8.

“The report should be pretty solid, relative to beaten- down expectations,” said Michelle Meyer, a senior economist at Bank of America Corp. in New York. “We should consider this old data. It doesn’t tell us much about the next few months. We’ll certainly see a slowdown.”

The Commerce Department’s report is due at 8:30 a.m. in Washington. Economists’ forecasts ranged from increases of 0.1 percent to 0.8 percent.

The figures are also projected to show incomes climbed 0.3 percent following a 0.1 percent gain the prior month, according to the survey median.

Auto Demand

Cars and light trucks sold at a 12.2 million seasonally adjusted pace of in July, up from 11.4 million in June, according to industry data. The rate trails the 12.6 million average pace through the first half of the year, according to Autodata Corp. Deliveries at Detroit-based General Motors Co. climbed 7.6 percent from the same month in 2010.

Retailers, including Macy’s Inc. (M) 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 from a year earlier.

After adjusting for inflation, which are the figures used to calculate gross domestic product, much of the projected gain in spending last month may be wiped away. Consumer prices rose 0.5 percent in July, a report from the Labor Department earlier this month showed.

Economic Slowdown

The economy grew at a 1 percent annual rate from April through June after a 0.4 percent gain in the prior quarter, capping the weakest six months of the recovery that began in mid-2009, Commerce Department figures showed last week. Household spending rose 0.4 percent, the weakest performance in two years.

A slump in confidence threatens to prolong the slump. The Thomson Reuters/University of Michigan index of consumer sentiment fell in August to the weakest reading since November 2008. The Bloomberg Consumer Comfort Index stabilized last week within striking distance of an all-time low.

Lowe’s Cos., the second-largest U.S. home-improvement retailer, said profit in its fiscal 2011 will be less than it previously projected as sales drop at stores open more than a year.

“Recent headlines regarding slowing growth and the U.S. credit rating downgrade underscore the continued weakness in the U.S. economy,” Robert A. Niblock, chairman and chief executive officer of Lowe’s, said on an Aug. 15 conference call. “The volume of negative news and the unsettling impact on equity markets is having a significant effect on an already fragile consumer mindset.”

Housing Slump

Housing remains a drag on growth and household finances. Contract signings for existing homes in July fell 0.9 percent after a 2.4 percent gain the prior month, economists forecast a National Association of Realtors’ report will show at 10 a.m.

“It is clear that the recovery from the crisis has been much less robust than we had hoped,” Federal Reserve Chairman Ben S. Bernanke said last week at a Jackson Hole, Wyoming, central bank symposium. “Economic growth has, for the most part, been at rates insufficient to achieve sustained reductions in unemployment.”

The jobless rate held at 9.1 percent in July, while payrolls grew by 117,000 workers, according to figures from the Labor Department. They rose an average 179,000 in the first four months of the year.

The economy also failed to create enough jobs in August to trim unemployment, economists in a Bloomberg survey said before a Labor Department report due Sept. 2.

                        Bloomberg Survey

==============================================================
                              Pers     Pers Core PCE  Pending
                               Inc    Spend   Prices    Homes
                              MOM%     MOM%     YOY%     MOM%
==============================================================
Date of Release              08/29    08/29    08/29    08/29
Observation Period            July     July     July     July
--------------------------------------------------------------
Median                        0.3%     0.5%     1.4%    -0.9%
Average                       0.4%     0.5%     1.4%    -1.0%
High Forecast                 0.8%     0.8%     1.5%     3.8%
Low Forecast                  0.1%     0.1%     1.4%    -4.8%
Number of Participants          59       64       30       33
Previous                      0.1%    -0.2%     1.3%     2.4%
--------------------------------------------------------------
4CAST                         0.4%     0.4%     ---     -4.8%
ABN Amro                      ---      0.4%     ---      0.0%
Action Economics              0.4%     0.5%     ---     -1.0%
Aletti Gestielle              0.2%     0.4%     1.4%     ---
Ameriprise Financial          0.3%     0.4%     1.4%    -2.5%
Banesto                       0.3%     0.4%     ---     -0.8%
Bantleon Bank AG              0.4%     0.5%     ---      ---
Barclays Capital              0.3%     0.7%     1.5%     0.0%
Bayerische Landesbank         0.2%     0.4%     1.4%     ---
BMO Capital Markets           0.4%     0.6%     1.4%    -2.0%
BNP Paribas                   0.3%     0.5%     ---      ---
Briefing.com                  0.4%     0.5%     ---     -1.0%
Capital Economics             0.4%     0.4%     1.5%    -3.0%
CIBC World Markets            0.5%     0.5%     1.4%     ---
Citi                          0.3%     0.6%     1.5%     ---
Comerica Inc                  0.1%     0.2%     ---      ---
Commerzbank AG                0.3%     0.6%     ---      0.0%
Credit Agricole CIB           0.3%     0.4%     1.4%     ---
Credit Suisse                 0.3%     0.6%     1.5%     ---
DekaBank                      0.4%     0.6%     1.5%    -2.0%
Desjardins Group              0.4%     0.5%     1.5%     ---
Deutsche Bank Securities      0.5%     0.5%     ---      0.0%
Deutsche Postbank AG          ---      0.4%     ---      ---
DZ Bank                       0.2%     0.3%     ---     -0.5%
Exane                         ---      0.5%     ---      ---
First Trust Advisors          0.3%     0.4%     ---      ---
FTN Financial                 0.3%     0.4%     1.4%     ---
Helaba                        0.5%     0.5%     1.4%     ---
HSBC Markets                  0.4%     0.7%     1.5%    -3.0%
Hugh Johnson Advisors         0.5%     0.4%     ---      ---
IDEAglobal                    0.3%     0.4%     1.4%    -0.5%
Informa Global Markets        0.3%     0.3%     ---      0.5%
ING Financial Markets         0.3%     0.6%     1.5%    -2.1%
Intesa-SanPaulo               0.4%     0.6%     ---      ---
Janney Montgomery Scott       0.2%     0.5%     1.5%    -1.8%
Landesbank Berlin             0.5%     0.4%     ---      ---
Landesbank BW                 0.4%     0.5%     1.4%    -2.0%
Maria Fiorini Ramirez         0.3%     0.5%     ---      ---
Market Securities             ---      ---      ---      3.8%
MET Capital Advisors          ---      0.1%     ---      ---
Moody’s Analytics             0.4%     0.6%     ---     -2.0%
Morgan Keegan & Co.           0.3%     0.2%     1.4%     ---
Morgan Stanley & Co.          0.4%     0.7%     ---      ---
Natixis                       0.3%     0.5%     1.4%     ---
Nomura Securities             0.5%     0.5%     1.5%     ---
Nord/LB                       0.3%     0.3%     ---      ---
OSK Group/DMG                 0.3%     0.8%     ---      ---
Parthenon Group               0.8%     0.6%     ---     -0.9%
Pierpont Securities           0.4%     0.5%     ---      ---
PNC Bank                      0.4%     0.4%     ---      ---
Raiffeisenbank International  0.3%     0.6%     ---      ---
Raymond James                 0.5%     0.4%     ---      ---
RBC Capital Markets           0.3%     0.6%     ---     -3.0%
Scotia Capital                0.4%     0.4%     ---     -0.1%
SMBC Nikko Securities         0.5%     0.5%     1.5%     0.5%
Societe Generale              0.3%     0.4%     1.5%     2.5%
Standard Chartered            0.3%     0.5%     1.4%    -0.8%
State Street Global Markets   0.5%     0.6%     1.5%    -3.5%
Stone & McCarthy Research     0.6%     0.3%     ---      ---
TD Securities                 0.4%     0.4%     1.4%    -1.0%
UBS                           0.3%     0.7%     1.5%    -0.5%
Wells Fargo & Co.             0.4%     0.3%     1.5%     ---
WestLB AG                     0.2%     0.2%     1.4%     0.4%
Westpac Banking Co.           0.3%     0.4%     ---     -2.0%
Wrightson ICAP                ---      0.5%     ---      0.0%
==============================================================

To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

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

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