Consumer Spending, Wage Gains in U.S. Probably Slowed in August

Consumer spending in the U.S. probably slowed in August as growing pessimism and a lack of jobs restrained the biggest part of the economy, economists said before a report today.

Purchases rose 0.2 percent after a 0.8 percent gain in July, according to the median estimate of 81 economists surveyed by Bloomberg News. The figures are also projected to show incomes rose 0.1 percent, the smallest increase in nine months.

Little hiring, stagnant wages and a plunge in stocks have shaken confidence in the recovery that began two years ago, which may hurt sales at retailers like Best Buy Co. and Target Corp. The sputtering economy has prompted policy makers from President Barack Obama to the Federal Reserve to take additional action in a bid to prevent another recession.

“Without payrolls picking up, you’re not going to get any boost in economic activity,” said Rudy Narvas, an economist at Societe Generale in New York. “People are very worried about the economy.”

The Commerce Department’s report is due at 8:30 a.m. in Washington. Economists’ forecasts for spending ranged from a 0.2 percent decrease to a 0.4 percent gain.

Other reports today may show businesses kept expanding in September and consumer sentiment held near a three-year low. The Institute for Supply Management-Chicago Inc.’s activity index eased to 55 this month from 56.5 in August, according to the median forecast of economists surveyed. Readings greater than 50 signal growth.

Confidence Languishes

The University of Michigan’s final confidence index for the month was probably 57.8, unchanged from a preliminary reading issued two weeks ago and up from August’s 55.7, the lowest since November 2008.

Employment was unchanged last month, the worst reading since September 2010, and the jobless rate held at 9.1 percent, the Labor Department said Sept. 2. The report also showed average hourly earnings fell for the first time in more than three years, further stressing consumers’ incomes.

Another Labor Department report this month showed the cost of living in the U.S., as measured by the consumer-price index, rose 0.4 percent in August, indicating that inflation may account for much of last month’s spending gain. Figures used to adjust consumer spending for price increases will also be released in today’s report.

Retail sales, an earlier gauge of household spending, stagnated in August, the Commerce Department said Sept. 14. Retailers like Best Buy and Target said battered consumer confidence has strained demand.

Having to Choose

“The consumer is making very measured choices,” Best Buy Chief Executive Officer Brian Dunn said in a telephone interview on Sept. 13 after the Richfield, Minnesota-based company reported a 30 percent decline in second-quarter profit . “I don’t think it’s a year where someone is going to buy a TV and a tablet and a new smartphone and go to Disneyland.”

The Bloomberg Consumer Comfort Index slumped last week to the second-lowest level on record, according to the report released yesterday. The comfort gauge reached similar readings of minus 53 three times in the first half of 2009, when the economy was in the recession. It fell to its all-time low of minus 54 in November 2008 and January 2009.

Confidence has been partly sacked by weakness in stock market. The Standard & Poor’s 500 Index has lost 12 percent since the end of June.

Auto Sales

The drop in wealth may be restraining purchases of big ticket items like automobiles. Vehicle sales ran at a 12.1 million seasonally adjusted annual rate in August, Autodata Corp. said Sept. 1, down 100,000 cars from the prior month. Demand this year may not reach the 13 million that was the low end of Ford Motor Co. (F)’s range of estimates, Chief Financial Officer Lewis Booth said Sept. 9.

Obama has been traveling the country this week to promote his $447 billion job creation plan. Speaking in Denver on Sept. 27, the president said the nation needs to reset its priorities to assure future growth.

Fed officials announced a plan last week to replace some notes in their portfolio with longer-term Treasuries to further reduce borrowing costs.

                             Bloomberg Survey

==============================================================
                              Pers     Pers  Chicago U of Mich
                               Inc    Spend       PM    Conf.
                              MOM%     MOM%    Index    Index
==============================================================
Date of Release              09/30    09/30    09/30    09/30
Observation Period            Aug.     Aug.    Sept.  Sept. F
--------------------------------------------------------------
Median                        0.1%     0.2%     55.0     57.8
Average                       0.1%     0.2%     55.2     57.7
High Forecast                 0.3%     0.4%     58.0     59.0
Low Forecast                 -0.3%    -0.2%     52.0     56.0
Number of Participants          76       81       57       63
Previous                      0.3%     0.8%     56.5     57.8
--------------------------------------------------------------
4CAST                         0.1%     0.0%     54.0     57.5
ABN Amro                      0.2%     0.2%     53.0     57.0
Action Economics              0.2%     0.1%     56.5     57.0
Aletti Gestielle              0.0%     0.2%     54.0     58.0
Ameriprise Financial          0.2%     0.2%     54.5     57.5
Banesto                       0.2%     0.2%     56.3     58.0
Bantleon Bank AG              0.0%     0.1%     55.5     57.0
Barclays Capital              0.1%     0.3%     55.0     56.3
Bayerische Landesbank         0.0%     0.2%     ---      57.8
BBVA                          0.1%     0.1%     56.0     58.0
BMO Capital Markets           0.2%     0.1%     56.5     57.8
BNP Paribas                  -0.2%     0.0%     53.0     58.0
BofA Merrill Lynch            ---      0.3%     55.0     58.0
Briefing.com                 -0.3%    -0.2%     53.0     57.0
Capital Economics             0.1%     0.1%     ---      57.8
CIBC World Markets            0.1%     0.2%     ---      ---
Citi                         -0.1%     0.2%     53.5     58.0
ClearView Economics           0.2%     0.2%     57.0     ---
Comerica                      0.1%     0.1%     ---      ---
Commerzbank AG                0.2%     0.2%     56.0     57.8
Credit Agricole               0.1%     0.2%     56.6     57.8
Credit Suisse                -0.1%     0.1%     ---      57.5
Daiwa Securities America      0.1%     0.2%     ---      57.0
Danske Bank                  -0.1%     0.0%     57.0     58.1
DekaBank                      0.1%     0.1%     54.0     57.8
Desjardins Group              0.1%     0.2%     54.0     57.8
Deutsche Bank Securities      0.1%     0.2%     56.0     57.8
Deutsche Postbank AG          ---      0.1%     ---      57.8
DZ Bank                       0.1%    -0.1%     53.0     ---
Exane                         ---      0.1%     54.5     ---
Fact & Opinion Economics      0.0%     0.1%     55.0     57.8
First Trust Advisors          0.3%     0.2%     56.9     58.0
FTN Financial                 0.0%     0.3%     ---      57.8
Goldman, Sachs & Co.          0.1%     0.1%     54.5     ---
Helaba                        0.0%     0.3%     55.0     ---
High Frequency Economics      0.2%     0.4%     53.0     57.8
HSBC Markets                  0.0%     0.4%     55.0     59.0
Hugh Johnson Advisors         0.2%     0.3%     57.0     58.0
IDEAglobal                    0.2%     0.2%     57.0     59.0
IHS Global Insight            0.0%     0.1%     ---      56.8
Informa Global Markets        0.2%     0.2%     56.0     57.6
ING Financial Markets         0.1%     0.2%     54.0     58.0
Intesa-SanPaulo               0.1%     0.2%     56.2     58.5
J.P. Morgan Chase             0.1%     0.1%     ---      57.5
Janney Montgomery Scott       0.0%     0.3%     ---      ---
Landesbank Berlin             0.1%     0.3%     53.0     57.8
Landesbank BW                 0.0%     0.1%     55.5     57.8
Manulife Asset Management     0.1%     0.1%     ---      57.5
Maria Fiorini Ramirez         0.1%     0.2%     ---      ---
MF Global                     0.0%     0.3%     55.0     57.8
Mizuho Securities             0.1%     ---      53.0     56.0
Moody’s Analytics             0.1%     0.0%     55.7     57.2
Morgan Keegan & Co.           0.0%     0.1%     ---      ---
Morgan Stanley & Co.          0.1%     0.1%     ---      ---
National Bank Financial       ---      0.1%     ---      ---
Natixis                       0.1%     0.1%     ---      ---
Nomura Securities             ---      0.3%     55.8     ---
Nord/LB                       0.1%     0.1%     56.5     58.0
OSK Group/DMG                 0.1%     0.3%     ---      ---
Parthenon Group               0.1%     0.3%     52.1     58.6
Pierian Capital               0.0%     0.3%     ---      57.8
Pierpont Securities           0.1%     0.2%     ---      58.5
PineBridge Investments        0.2%     0.2%     54.0     57.0
PNC Bank                      0.0%     0.1%     ---      ---
Raiffeisenbank International  0.0%     0.2%     55.0     57.0
Raymond James                 0.0%     0.1%     55.5     57.4
RBC Capital Markets           0.1%     0.2%     57.2     59.0
RBS Securities                0.0%     0.1%     ---      ---
Scotia Capital                0.0%     0.1%     ---      ---
SMBC Nikko Securities         0.2%     0.2%     56.5     57.8
Societe Generale              0.3%     0.2%     58.0     57.6
Standard Chartered            0.1%     0.2%     57.5     58.3
State Street Global Markets   0.1%     0.1%     56.4     57.5
Stone & McCarthy Research     0.0%     0.2%     57.6     57.5
TD Securities                 0.1%     0.2%     55.0     57.0
UBS                           0.1%     0.4%     55.0     57.5
Union Investment              0.1%     0.1%     ---      57.8
University of Maryland        0.2%     0.2%     55.0     57.8
Wells Fargo & Co.             0.1%     0.1%     ---      ---
WestLB AG                     0.1%     0.2%     56.8     57.8
Westpac Banking Co.           0.0%     0.1%     52.0     57.0
Wrightson ICAP                ---      0.1%     56.5     57.5
==============================================================

To contact the reporter on this story: Alex Kowalski in Washington at akowalski13@bloomberg.net

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

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