Retail Sales Probably Rose in August: Economy Preview

(Corrects month in headline of story published Sept. 9.)

Retail sales probably improved for a second month in August as consumers overcame a lack of jobs and stagnant wages, economists said before reports this week.

A 0.7 percent increase in purchases would follow a 0.8 percent July advance, according to the median forecast of 66 economists surveyed by Bloomberg News ahead of Commerce Department figures on Sept. 14. Other reports may show inflation accelerated and manufacturing stagnated.

Rising food and fuel prices and disappointing gains in payrolls may further damage household finances, making it a challenge for retailers such as Gap Inc. (GPS) and Macy’s Inc. (M) to keep luring customers in the second half of 2012. Widespread labor- market weakness bolsters the case for Federal Reserve policy makers to take additional action to spur growth when they gather this week.

“It’s going to be difficult,” said Gus Faucher, a senior economist at PNC Financial Services Group Inc. in Pittsburgh, whose retail sales forecast matched the median estimate. “Income is basically flat, and at the same time people are spending more for food and energy. If job growth remains flat like this, we are going to see weak growth in consumer spending.”

The economy added 96,000 workers last month, less than the 130,000 projected by the median forecast of economists surveyed by Bloomberg, figures from the Labor Department showed last week. The unemployment rate fell to 8.1 percent after 368,000 Americans left the workforce. More than 12.5 million Americans remain unemployed.

‘Grave Concern’

The jobs report underscored the “grave concern” about the labor market expressed by Fed Chairman Ben S. Bernanke during a speech at a symposium at Jackson Hole, Wyoming, late last month. It also bolsters the case for more monetary easing when policy makers announce their next move on Sept. 13.

The Standard & Poor’s 500 Index had its biggest weekly gain since June as the slowdown in hiring fueled bets the Fed will add more stimulus. The S&P 500 climbed 2.2 percent over the four days ended Sept. 7 to close at a four-year high of 1,437.92.

Back-to-school promotions and cooler temperatures in the Northeast drew shoppers into stores in the second half of August, pushing sales higher, according to Retail Metrics, based in Swampscott, Massachusetts.

Same-store sales rose 2.7 percent, beating the average estimate for a 1.8 percent gain, the research company reported last week. Excluding drugstores, sales in August rose 5.9 percent, beating estimates for a 4.2 percent increase. Purchases increased 4.4 percent in July.

Rising Sales

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

“Consumption and employment and income are making relatively moderate kinds of progress,” said Steven Wieting, managing director at Citigroup Global Markets Inc. in New York. “But we’re coming back off a very deep trough and the recovery is only partial.”

The cost of living is projected to rise by 0.6 percent in August, the biggest jump since June 2009, after being little changed the prior month, according to the median in a Bloomberg survey. The Labor Department will release the consumer price gauge on Friday.

Prices excluding food and fuel rose 0.2 percent after a 0.1 percent gain in July, the survey showed.

“We have a very fragile consumer environment right now in the U.S.,” Brian Cornell, chief executive officer of PepsiCo Inc. (PEP)’s Americas foods business, said at a Sept. 5 conference. “Unemployment remains very, very high. Food-stamp usage continues to grow. And we’ve seen quite a bit of volatility in fuel.”

Manufacturing Cools

Manufacturing, a pillar of the recovery from the recession, is now showing signs of stress as global growth slows. Factory jobs had their biggest decline in two years, last week’s payroll report showed. Factories also reduced the employee workweek.

The drop in employment and hours means output probably cooled. Industrial production was little changed in August after four months of gains, another report a Fed report on Sept. 14 may show according to economists surveyed.

A jump in crude oil prices that began in July probably contributed to a widening of the trade deficit, economists forecast a Commerce Department will show Sept. 11. The gap climbed to $44.4 billion from $42.9 billion in June, according to the survey median.

                        Bloomberg Survey

==============================================================
                        Release    Period    Prior     Median
Indicator                 Date               Value    Forecast
==============================================================
Trade Balance $ Blns      9/11      July     -42.9     -44.4
PPI  MOM%                 9/13      Aug.      0.3%      1.2%
Core PPI MOM%             9/13      Aug.      0.4%      0.2%
Initial Claims ,000’s     9/13     8-Sep      365       370
CPI  MOM%                 9/14      Aug.      0.0%      0.6%
Core CPI MOM%             9/14      Aug.      0.1%      0.2%
Retail Sales MOM%         9/14      Aug.      0.8%      0.7%
Retail ex-autos MOM%      9/14      Aug.      0.8%      0.6%
Ind. Prod. MOM%           9/14      Aug.      0.7%      0.0%
==============================================================

To contact the reporter on this story: Lorraine Woellert in Washington at lwoellert@bloomberg.net

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

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