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Retail Sales in U.S. Rose 0.9% in August on Auto Demand

Sept. 14 (Bloomberg) -- Economics Editor Michael McKee breaks down the Retail Control Number and how it will effect the economy after Ben Bernanke's decision yesterday. He speaks on Bloomberg Television's "In the Loop." (Source: Bloomberg)

Retail sales in the U.S. increased in August by the most in six months, boosted by demand for automobiles along with higher gasoline prices that left consumers with less to spend on other goods.

The 0.9 percent gain followed a revised 0.6 percent advance in July that was smaller than initially reported, the Commerce Department said today in Washington. The median forecast of 84 economists surveyed by Bloomberg called for an increase of 0.8 percent. Sales slowed at department stores, apparel retailers and electronics outlets.

Higher food and fuel costs along with smaller gains in payrolls and wages are squeezing household finances, posing a challenge for merchants such as Kohl’s Corp. (KSS) and Macy’s Inc. Labor-market weakness prompted Federal Reserve policy makers yesterday to take another step to spur the three-year expansion.

“You can take some encouragement from this, but it’s probably not as strong as the headline number suggests,” said Millan Mulraine, a senior U.S. strategist at TD Securities in New York. “The price of gas will probably make a dent as it diverts from discretionary spending.”

Stocks climbed as markets rallied around the world on the Fed’s bond-purchase program. The Standard & Poor’s 500 Index rose 0.6 percent to 1,468.56 at 11:12 a.m. in New York.

Photographer: Victor J. Blue/ Bloomberg

A shopper in New York on Sept. 13, 2012. Close

A shopper in New York on Sept. 13, 2012.

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Photographer: Victor J. Blue/ Bloomberg

A shopper in New York on Sept. 13, 2012.

Real Earnings

A report from the Labor Department today showed average hourly earnings adjusted for inflation decreased 0.7 percent in August from the previous month, the biggest drop since June 2009. Real wages were unchanged from August 2011.

Consumer prices climbed 0.6 percent in August, the most since June 2009, as Americans paid more at filling stations, the Labor Department also said.

Economists’ estimates for total retail sales in the Bloomberg survey ranged from increases of 0.3 percent to 1.5 percent.

Sales excluding automobiles and gasoline rose 0.1 percent, less than the 0.4 percent gain forecast in the survey. Seven of 13 major categories showed an increase last month.

Purchases increased 1.3 percent at automobile dealers, the most since February, after a 0.1 percent gain the prior month, today’s report showed. Retail purchases excluding autos climbed 0.8 percent. Economists in the Bloomberg survey projected a gain of 0.7 percent.

Auto Sales

Cars and light trucks sold at a 14.5 million annual rate in August, the industry’s strongest month since 2009, compared with a 14.1 million pace in July, Ward’s Automotive Group data show. Among U.S.-based carmakers, sales rose 10 percent at General Motors Co. (GM) and 14 percent at Chrysler Group LLC.

“Economic fundamentals remain modest but stable,” Jenny Lin, a senior U.S. economist at Ford, said during a Sept. 4 conference call. Ford car and light-truck sales rose 13 percent last month, more than estimated. “Consumer confidence is stable as compared to July. The housing sector shows signs of revival.”

Consumer sentiment unexpectedly improved in September, another report showed.

The Thomson Reuters/University of Michigan preliminary index of consumer sentiment climbed to 79.2 from 74.3 the prior month. The gauge was projected to fall to 74, according to the median forecast of 71 economists surveyed by Bloomberg News.

Service-station sales, driven by higher gasoline prices, surged 5.5 percent in August, the most since November 2009. The Commerce Department’s figures aren’t adjusted for inflation. Regular-grade gasoline prices have climbed to an average of $3.87 per gallon, up 54 cents since the start of July, according to AAA, the nation’s largest motoring organization.

U.S. GDP

Demand at building-material establishments rose 1 percent. Today’s report showed core retail sales, the category used to calculate gross domestic product that excludes sales at auto dealers, building material stores and service stations, decreased 0.1 percent in August after a 0.8 percent rise.

Consumer spending, which accounts for about 70 percent of the economy, rose at a 1.7 percent annual rate in the second quarter, the weakest pace since the third quarter of 2011, Commerce Department data show.

Spending fell 0.1 percent at clothing stores and 0.3 percent at general merchandise stores. Purchases at restaurants and furniture outlets increased.

Department-store sales rose 0.1 percent after a 0.8 percent gain. The figures are contrary to industry data showing retailers posted August same-store sales that topped analysts’ estimates as consumers took advantage of back-to-school promotions.

Department Stores

Same-store sales at Gap Inc., the biggest U.S. specialty- apparel retailer, climbed 9 percent, beating the average projection for a 5.5 percent gain from analysts surveyed by researcher Retail Metrics Inc. Macy’s Inc. (M), the department-store chain, posted a 5.1 increase in same-store sales, topping the 3.3 percent estimate.

In a bid to stimulate the economy and reduce unemployment, the Fed yesterday said it will buy mortgage debt until the labor market improves and hold interest rates low at least through mid-2015.

The economy added 96,000 workers in August, fewer than the 130,000 projected by the median forecast of economists surveyed by Bloomberg. The unemployment rate fell to 8.1 percent after 368,000 Americans left the workforce. Last week, the number of people filing first-time claims for unemployment benefits rose to their highest in almost two months.

Home Products

Sales of home products are still trying to recover from the recession that ended in June 2009. Industry sales have yet to return to their 2005 peak despite population gains, said Jim Black, chief financial officer of Mattress Firm Holdings Co. (MFRM) in Houston.

“Housing is starting to show some positive signs, but hasn’t rebounded, and we haven’t seen consumer sentiment and or unemployment improve to the levels that we have seen pre- recession,” Black said on a Sept. 6 earnings call. “When the election cycle is over and there is less noise about the potential economy, we certainly see that there could be some tailwind in that. And we know that the consumers have been on the sidelines.”

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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