Retail Sales in U.S. Probably Rose in September on Auto Demand

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

The 0.8 percent increase would follow a 0.9 percent gain in August, according to the median forecast of 66 economists surveyed by Bloomberg. Manufacturing in the New York area stabilized, another report may show.

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.

“The consumer is hanging in there, which is somewhat remarkable given the headwinds,” said Conrad DeQuadros, senior economist and partner at RDQ Economics LLC in New York. “To see faster consumer spending, we need to have stronger employment growth.”

The Commerce Department’s sales figures are due at 8:30 a.m. in Washington. Economists’ estimates ranged from gains of 0.3 percent to 1.3 percent.

Manufacturing is stabilizing after some reports raised concern that this pillar of the expansion was faltering. The Federal Reserve Bank of New York’s general economic index improved to minus 4 in October from minus 10.4 the prior month, according to the Bloomberg survey median ahead of the figures due at 8:30 a.m. Readings less than zero signal contraction in the so-called Empire State Index that covers New York, northern New Jersey and southern Connecticut.

Auto Sales

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.

“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.

Discounters’ Sales

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.

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

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.

Payroll Gains

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 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.

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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