Retail Sales Probably Rose on Auto Demand: U.S. Economy Preview

Retail sales in the U.S. probably rose in September as demand for automobiles kept improving and discounters benefitted from a final rush of back-to-school shopping, economists said before reports this week.

The 0.8 percent increase would follow a 0.9 percent gain in August, according to the median forecast of 63 economists surveyed by Bloomberg ahead of Commerce Department figures tomorrow. Other reports may show fuel prices pushed up the cost of living and manufacturing stabilized.

A drop in joblessness and firming home prices are leading to gains in confidence that may help chains such as Target Corp. (TGT) and TJX Cos. (TJX) keep attracting customers with promotions. At the same time, rising energy costs and concern about looming tax changes at the end of the year may prevent household spending, the biggest part of the economy, from strengthening much more.

“There was a modest pickup in retail sales, but I wouldn’t expect an acceleration,” said Yelena Shulyatyeva, a U.S. economist at BNP Paribas in New York. “We have some pent-up demand for autos. Things are getting better in the labor market, but it’s very slow.”

Auto sales remain a bright spot as lower interest rates prompt Americans to replace older vehicles. Cars and light trucks sold at a 14.9 million annual pace in September, the most since March 2008, according to Ward’s Automotive Group. Chrysler Group LLC and General Motors Co. (GM) reported gains.

Positive Signs

“We continue to be encouraged by positive signs from the housing sector, lower jobless claims, higher consumer sentiment and higher consumer spending,” Kurt McNeil, GM’s vice president of U.S. sales, said on an Oct. 2 conference call. “The stiffest headwinds are uncertainty, some of which is related to the sovereign debt crisis in Europe and concerns about the pace of growth here at home.”

Excluding autos, retail sales probably increased 0.6 percent last month, according to the Bloomberg survey median.

Retailers benefited from demand for back-to-school items, with September same-store sales topping analysts’ estimates at discount and specialty-apparel chains. Target, the second- biggest U.S. discounter, had a 2.1 percent gain from a year earlier, and TJX, the owner of T.J. Maxx and Marshalls, reported a 6 percent increase.

Some companies are less optimistic. Dollar Tree Inc. (DLTR), the U.S. operator of more than 4,500 discount stores, last week said third-quarter sales will be at the low end of its forecast.

Retail Sales

The Commerce Department’s retail sales data, which aren’t adjusted for prices, may also reflect costlier gasoline. A gallon of regular fuel at the pump cost an average $3.83 in September, up 13 cents from August and the highest level since April, according to AAA, the biggest U.S. auto group.

Higher fuel costs are also feeding into the cost of living. The consumer price index rose 0.5 percent after a 0.6 percent gain in August, according to the Bloomberg survey median. The Labor Department report is scheduled for Oct. 16. Excluding volatile food and fuel cost, prices rose 0.2 percent, according to economists surveyed.

Investors are projecting that Americans will keep shopping. The Standard & Poor’s Supercomposite Retailing Index, which includes Macy’s Inc. and Gap Inc., has risen 23.1 percent this year, compared with a 13.6 percent advance for the broader S&P 500 Index.

A stronger labor market would help boost the outlook for retail sales. Payrolls rose 114,000 in September after a 142,000 increase the prior month, according to Labor Department figures. The unemployment rate dropped to a three-year low of 7.8 percent from 8.1 percent.

Household Purchases

Household purchases may have grown at a 1.9 percent annual rate in the third quarter after a 1.5 percent gain in the prior three months, according to the median forecast in a separate Bloomberg survey of economists taken from Oct. 5 to Oct. 10. Spending will rise 2.1 percent this quarter, the survey showed.

Manufacturing is stabilizing after some reports raised concern that this pillar of the expansion was faltering. Fed data due on Oct. 16 may show industrial production grew 0.2 last month after a 1.2 percent drop that was the biggest since March 2009, according to the Bloomberg survey median. Factories in the New York region shrank at a slower pace, and Philadelphia-area activity was little-changed, economists projected other reports will show.

Housing continues to improve, Commerce Department data may show on Oct. 17. Builders began work on 770,000 dwellings at an annual rate in September, up 2.7 percent from the prior month, according to the survey median. The Commerce Department’s report on Oct. 17 is also projected to show that permits, a measure of future projects, also climbed.

                         Bloomberg Survey

===============================================================
                        Release    Period    Prior     Median
Indicator                 Date               Value    Forecast
================================================================
Empire Manu. Index       10/15      Oct.     -10.4      -4.0
Retail Sales MOM%        10/15     Sept.      0.9%      0.8%
Retail ex-autos MOM%     10/15     Sept.      0.8%      0.6%
Retail exauto/gas MOM%   10/15     Sept.      0.1%      0.4%
Retail control MOM%      10/15     Sept.     -0.1%      0.5%
Business Inv. MOM%       10/15      Aug.      0.8%      0.5%
CPI  MOM%                10/16     Sept.      0.6%      0.5%
Core CPI MOM%            10/16     Sept.      0.1%      0.2%
CPI  YOY%                10/16     Sept.      1.7%      1.9%
Core CPI YOY%            10/16     Sept.      1.9%      2.0%
Ind. Prod. MOM%          10/16     Sept.     -1.2%      0.2%
Cap. Util. %             10/16     Sept.     78.2%     78.3%
NAHB Housing Index       10/16      Oct.       40        41
Housing Starts ,000’s    10/17     Sept.      750       770
Housing Starts MOM%      10/17     Sept.      2.3%      2.7%
Building Permits ,000’s  10/17     Sept.      801       810
Building Permits MOM%    10/17     Sept.     -1.2%      1.1%
Initial Claims ,000’s    10/18     13-Oct     339       365
Cont. Claims ,000’s      10/18     6-Oct      3273      3275
BCCI                     10/18    Oct. 15    -38.5      n/a
Bloomberg US Econ        10/18      Oct.      -8.0      n/a
Philly Fed Index         10/18      Oct.      -1.9      0.0
LEI  MOM%                10/18     Sept.     -0.1%      0.2%
Exist Homes Mlns         10/19     Sept.      4.82      4.75
Exist Homes MOM%         10/19     Sept.      7.8%     -1.5%
================================================================

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

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

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Retail Sales Probably Rose on Auto Demand

Sam Hodgson/Bloomberg

Investors are projecting that Americans will keep shopping.

Investors are projecting that Americans will keep shopping. Photographer: Sam Hodgson/Bloomberg

2:44

Oct. 12 (Bloomberg) -- Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ, talks about U.S. consumer sentiment and wholesale prices for September. The Thomson Reuters/University of Michigan preliminary October consumer sentiment index increased to 83.1, the highest level since September 2007, from 78.3 the prior month. The producer price index climbed 1.1 percent after a 1.7 percent gain the Labor Department reported today in Washington. (Source: Bloomberg)