Retail Sales Probably Increased in July: U.S. Economy Preview

Sales at U.S. retailers probably rose in July for the first time in four months as employment picked up, easing concern the expansion is faltering, economists said before reports this week.

The projected 0.3 percent advance in purchases would follow a 0.5 percent drop in June, according to the median forecast of 65 economists surveyed by Bloomberg News ahead of the Commerce Department figures on Aug. 14. Other reports may show the cost of living increased and factory production climbed last month.

Gains in purchases at places like Gap Inc. and Macy’s Inc. (M) indicate American households are looking beyond the global economic slowdown as hiring improves. At the same time, unemployment in excess of 8 percent is thwarting a binge in spending as consumers look to repair finances and pay down debt.

Consumer spending growth remains quite subdued,” said Ryan Wang, an economist at HSBC Securities USA Inc. in New York. “Consumers are still trying to rebuild savings, which basically keeps spending growth in this moderate range.”

Households struggled to support the expansion last quarter. Consumer purchases, about 70 percent of the economy, grew at a 1.5 percent annual rate from April to June, the weakest in a year, according to Commerce Department data.

Economists project the retail sales category in the report used to calculate gross domestic product, which excludes auto dealers, building-material stores and service stations, will show a 0.4 percent gain in July following a 0.1 percent decline the prior month.

Sales Improve

July’s increase comes after same-store sales at the more than 20 companies tracked by Retail Metrics Inc. rose 4.4 percent that month, almost four times analysts’ estimates, compared with a 0.3 percent increase in June.

Sales at Gap, the biggest U.S. specialty-apparel retailer, climbed 10 percent last month from the same period in 2011. Macy’s, the owner of its namesake and Bloomingdale’s department stores, posted a 4.1 percent gain.

“This month we saw broad-based strength across the U.S.,” Sherry Lang, spokeswoman for TJX Cos., said during an Aug. 2 sales conference call. Same-store sales at the owner of the Marshalls and T.J. Maxx chains rose 7 percent in July.

Underpinning the stronger sales, payrolls increased by 163,000 in July, the most in five months, according to Labor Department figures. While the improvement eased fears the U.S. labor market might continue stumbling following a second-quarter slowdown, the jobless rate rose to 8.3 percent.

Production Climbs

Sustained gains in retail sales may stimulate manufacturing, which is receiving fewer orders as economies in Europe and Asia slow. So far this year, automobile production has kept factory assembly lines busy.

Output at the nation’s factories, mines and utilities probably rose 0.5 percent in July after a 0.4 percent gain the previous month, economists forecast a Federal Reserve report will show on Aug. 15.

The hottest July in the lower 48 states in 117 years of records probably drove some of the production gains as Americans used more electricity to run air conditioners. The temperature last month averaged 77.6 degrees Fahrenheit (25.3 Celsius), or 3.3 degrees above normal, according to data from the National Oceanic and Atmospheric Administration.

Also on Aug. 15, a Labor Department report will probably show the consumer-price index increased 0.2 percent in July after an unchanged reading the prior month, according to the survey median. Prices are projected to rise 1.6 percent over the past year, down from 1.7 percent in June.

Fed’s View

Fed official said they believe inflation would run “at or below” their goal of 2 percent, according to a statement from the Federal Open Market Committee on Aug. 1. Their preferred price gauge, issued by the Commerce Department and tied to consumer spending, rose 1.5 percent in the 12-months-ended June, matching the smallest gain in more than a year.

Investors agree with that outlook. The difference in yields between 5-year notes and Treasury Inflation Protected Securities, or TIPS, which represents traders’ expectations for the rate of inflation over the life of the bonds, fell to 1.90 percentage points at 4:54 p.m. in New York on Aug. 10.

                        Bloomberg Survey

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                        Release    Period    Prior     Median
Indicator                 Date               Value    Forecast
================================================================
PPI  MOM%                 8/14      July      0.1%      0.2%
Core PPI MOM%             8/14      July      0.2%      0.2%
PPI  YOY%                 8/14      July      0.7%      0.5%
Core PPI YOY%             8/14      July      2.6%      2.3%
Retail Sales MOM%         8/14      July     -0.5%      0.3%
Retail ex-autos MOM%      8/14      July     -0.4%      0.3%
Retail ex auto/gas MOM%   8/14      July     -0.2%      0.5%
Retail control MOM%       8/14      July     -0.1%      0.4%
Business Inv. MOM%        8/14      June      0.3%      0.2%
Empire Manu. Index        8/15      Aug.      7.4       7.0
CPI  MOM%                 8/15      July      0.0%      0.2%
Core CPI MOM%             8/15      July      0.2%      0.2%
CPI  YOY%                 8/15      July      1.7%      1.6%
Core CPI YOY%             8/15      July      2.2%      2.2%
Ind. Prod. MOM%           8/15      July      0.4%      0.5%
Cap. Util. %              8/15      July     78.9%     79.2%
NAHB Housing Index        8/15      Aug.       35        34
Housing Starts ,000’s     8/16      July      760       758
Housing Starts MOM%       8/16      July      6.9%     -0.3%
Building Permits ,000’s   8/16      July      760       766
Building Permits MOM%     8/16      July     -3.1%      0.7%
Initial Claims ,000’s     8/16     11-Aug     361       365
Philly Fed Index          8/16      Aug.     -12.9      -5.0
U of Mich Conf. Index     8/17     Aug. P     72.3      72.0
LEI  MOM%                 8/17      July     -0.3%      0.2%
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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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