Consumer Spending in U.S. Probably Stagnated in October on Storm

Spending by U.S. consumers probably stagnated in October as income gains slowed and superstorm Sandy deterred those in the Northeast from shopping at malls and car dealerships, economists said before a report today.

Household purchases were unchanged last month, the weakest reading since June, after advancing 0.8 percent in September, according to the median estimate of 79 economists surveyed by Bloomberg. The report may also show incomes grew 0.2 percent after increasing 0.4 percent in September.

Sandy shuttered hundreds of retailers when it made landfall on Oct. 29, temporarily countering the benefit from rising consumer sentiment that has brightened the holiday-shopping outlook. Faster job and income growth would help stoke household spending after a third-quarter slowdown, helping explain why the Federal Reserve is pursuing policy aimed at spurring hiring.

“There was basically a reorganization of sales around the hurricane-affected areas,” said Steven Wieting, head of economic and market analysis at Citigroup Inc. in New York. “It’s likely to affect November as well.”

The Commerce Department will release the spending report at 8:30 a.m. in Washington. Economists’ forecasts ranged from a drop of 0.2 percent to a gain of 0.5 percent.

Household purchases climbed at a 1.4 percent annual rate in the third quarter, the smallest gain in more than a year and down from a previously reported 2 percent advance, revised data from Commerce Department showed yesterday. In the second quarter, spending increased at a 1.5 percent pace.

Sandy Effect

An earlier read on October spending showed retail sales fell for the first time in four months, according to Nov. 14 figures from the Commerce Department. While the government said it was able to collect information from storm-affected areas, it said it couldn’t quantify Sandy’s impact.

Retailers posted November same-store sales that trailed analysts’ estimates as superstorm Sandy depressed traffic early in the month, overwhelming gains from the start of holiday shopping, according to a report yesterday.

Sales at Macy’s Inc. (M), the second-biggest U.S. department- store company, fell 0.7 percent, compared with the average projection for a 2.5 percent gain from analysts surveyed by researcher Retail Metrics Inc. Target Corp., the second-largest U.S. discount chain, posted a 1 percent decline in same-store sales, missing the estimate for a 2.1 percent increase.

Macy’s shares dropped 4.3 percent yesterday and Target fell less than 0.1 percent even as the Standard & Poor’s 500 Index climbed 0.4 percent amid investor optimism that lawmakers will reach agreement on the federal budget.

Trailing Estimates

Same-store sales for the more than 20 companies tracked by Swampscott, Massachusetts-based Retail Metrics increased 1.6 percent, excluding drugstores, trailing the estimate for a 3.5 percent gain, the firm said. That follows a 5 percent October advance.

Sandy closed as many as 230 stores owned by Brown Shoe Co., according to Diane Sullivan, the St. Louis-based company’s president and chief executive officer. While all but four locations re-opened within nine days, the operator of the Famous Footwear chain expects fourth-quarter sales were cut by about $2.5 million, Sullivan said during a Nov. 20 earnings call.

The storm affected 106 Urban Outfitters Inc. (URBN) stores and curtailed online shopping, reducing fiscal third-quarter revenue by about 1 percentage point, according to Chief Financial Officer Frank Conforti. The impact will be smaller in the fourth quarter, he said on a Nov. 19 call with analysts.

Car and light truck demand also cooled, falling to a 14.2 million pace last month, after Sandy hit during the auto industry’s busiest time of the month. Carmakers have said those sales should be made up by the end of the year.

Even so, job growth, climbing home values and better household finances are lifting Americans’ spirits. The Conference Board’s sentiment index climbed this month to the highest level since February 2008, a report showed this week.

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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