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Retail Sales in U.S. Probably Fell on Cooling Automobile Demand

Retail sales probably fell in April for a second consecutive month, hurt by cooling demand for automobiles, economists said before a report today.

The 0.3 percent drop last month would follow a 0.4 percent decline in March, according to the median forecast of 74 economists surveyed by Bloomberg. Falling gasoline prices also hurt service-station receipts, overshadowing gains at discounters including TJX Cos. (TJX)

Economists forecast consumer spending will slow this quarter as Americans rebuild savings and come to grips with the January increase in the payroll tax. At the same time, lower fuel costs combined with rising stock and home values are boosting buying power, which will underpin purchases as the labor market mends.

“The headwind from taxes is still there, but we also have some tailwinds,” said Jonathan Basile, an economist at Credit Suisse in New York. “On top of that, the drop in gasoline prices is freeing up a little more money for consumers to spend outside the gas pump.”

The Commerce Department will release the retail sales figures at 8:30 a.m. in Washington. Economists’ estimates in the Bloomberg survey ranged from a decline of 0.9 percent to a gain of 0.3 percent.

Household spending will grow at a 1.8 percent annualized rate this quarter after expanding at a 3.2 percent pace in the first three months of the year, the most since the end of 2010, according to the median forecast of economists surveyed by Bloomberg this month.

Tax Increase

Higher taxes may be starting to squeeze budgets. At the beginning of 2013, the payroll tax reverted to its 2010 rate of 6.2 percent after holding at 4.2 percent for two years.

Cars and light trucks sold at a 14.9 million annual pace in April, down from a 15.2 million rate the prior month, according to data from Ward’s Automotive Group. The average for the first quarter was 15.3 million, the strongest since the same period in 2008 and a sign the longer-term outlook remains positive.

Ford Motor Co. (F), General Motors Co. and Chrysler Group LLC said sales increased in April from the same month last year.

“Low borrowing costs and rising consumer wealth should continue to support spending growth,” Jenny Lin, Dearborn, Michigan-based Ford’s senior U.S. economist, said on a May 1 conference call.

Fuel Costs

Cheaper gasoline also restrained receipts at filling-stations last month because the Commerce Department’s data aren’t adjusted for prices.

A gallon of regular gasoline at the pump averaged $3.55 in April, lower than March’s $3.69. The price peaked at a four-month high of $3.79 on Feb. 26, according to AAA, the biggest U.S. auto group.

“Vehicle sales are going to be a drag but we’re looking for a more solid underbelly to retail sales,” said Basile.

Excluding automobiles and gasoline, retail sales probably climbed 0.3 percent in April after falling 0.1 percent the prior month, according to the median forecast in the Bloomberg survey.

Retailers that sell discounted name-brand clothing and home goods were among those showing the best results. Same-store sales jumped 8 percent last month from the same time in 2012 at TJX, the owner of T.J. Maxx and Marshalls stores, while Ross Stores Inc. (ROST) had a 7 percent gain. Results at both chains exceeded analysts’ forecasts.

May is “off to a strong start,” Sherry Lang, senior vice-president of global communications at Framingham, Massachusetts-based TJX, said on a May 9 sales call. “It was nice to see strength in apparel as well as home categories across the board.”

Missing Estimate

Nonetheless, the gains haven’t been broad based. L Brands Inc. (LTD), the operator of the Victoria’s Secret lingerie chain, reported a 2 percent rise in April sales at stores open at least a year, missing analysts’ average estimate.

Investors are betting retailers will weather the fallout from higher taxes. The Standard & Poor’s Supercomposite Retailing Index has advanced 18.7 percent this year, compared with a 14.6 percent gain in the broader S&P 500 (SPX) index.

Advances in equity prices, which mainly benefit wealthier Americans, are helping to underpin consumer spending. U.S. stocks are in the fifth year of a bull market amid better-than-forecast corporate earnings and record stimulus by the Federal Reserve.

Retail sales may also keep getting help from the housing market. Residential real-estate prices rose in the year ended in February by the most since May 2006, according to the S&P/Case-Shiller index of house values in 20 cities.

Better job growth would help spur purchases and put more of the 11.7 million unemployed Americans back to work. Payrolls expanded by 165,000 workers in April after a 138,000 gain in March, according to the Labor Department. They rose by 236,500 a month on average from November through February.

                    Bloomberg Survey

================================================================
                            Retail   Retail Retail ex  Retail
                             Sales ex-autos auto/gas  control
                              MOM%     MOM%     MOM%     MOM%
================================================================

Date of Release              05/13    05/13    05/13    05/13
Observation Period           April    April    April    April
----------------------------------------------------------------
Median                       -0.3%    -0.2%     0.3%     0.3%
Average                      -0.3%    -0.1%     0.3%     0.3%
High Forecast                 0.3%     0.5%     0.5%     0.5%
Low Forecast                 -0.9%    -0.9%     0.0%     0.1%
Number of Participants          74       65       18       18
Previous                     -0.4%    -0.4%    -0.1%    -0.2%
----------------------------------------------------------------
4CAST                        -0.2%     0.1%     0.5%     ---
ABN Amro                     -0.3%     ---      ---      ---
Action Economics             -0.4%    -0.4%     ---      ---
Ameriprise Financial         -0.1%     0.0%     0.4%     ---
Bank of the West             -0.3%    -0.2%     ---      ---
Banorte-IXE                  -0.3%     ---      ---      0.1%
Bantleon Bank AG             -0.2%    -0.1%     ---      ---
Barclays                     -0.5%    -0.4%     ---      0.1%
Bayerische Landesbank        -0.5%    -0.4%     ---      ---
BBVA                         -0.2%    -0.1%     ---      ---
BMO Capital Markets          -0.2%     0.0%     ---      ---
BNP Paribas                  -0.7%    -0.4%     ---      0.2%
BofA Merrill Lynch           -0.5%    -0.4%     ---      0.1%
Briefing.com                 -0.7%    -0.5%     ---      ---
Capital Economics            -0.6%    -0.3%     ---      ---
CIBC World Markets           -0.4%    -0.3%     ---      ---
Citi                         -0.4%    -0.3%     ---      ---
ClearView Economics           0.3%     0.5%     ---      ---
Commerzbank AG               -0.4%    -0.4%     ---      ---
Credit Agricole CIB          -0.2%     0.0%     0.2%     ---
Credit Suisse                -0.2%    -0.1%     0.5%     0.5%
Danske Bank A/S              -0.3%    -0.2%     0.4%     ---
DekaBank                      0.0%     0.1%     0.4%     0.4%
Desjardins Group             -0.3%    -0.3%     ---      ---
Deutsche Bank Securities     -0.4%    -0.3%     0.2%     ---
Deutsche Postbank AG         -0.5%    -0.2%     ---      ---
First Trust Advisors         -0.1%     0.3%     ---      ---
Hammer Partners              -0.2%     0.0%     ---      ---
Helaba                       -0.4%    -0.3%     ---      ---
HSBC Markets                 -0.3%    -0.1%     0.5%     0.4%
Hugh Johnson Advisors         0.1%     0.3%     ---      ---
IDEAglobal                   -0.3%     0.0%     ---      ---
IHS Global Insight           -0.5%    -0.4%     ---      ---
Informa Global Markets       -0.5%    -0.2%     ---      ---
ING Financial Markets        -0.5%    -0.2%     0.2%     ---
Intesa Sanpaolo              -0.2%    -0.1%     ---      ---
J.P. Morgan Chase            -0.4%    -0.4%     ---      ---
Janney Montgomery Scott      -0.3%    -0.1%     0.0%     ---
Jefferies                    -0.4%    -0.2%     ---      ---
John Hancock Financial        0.2%     0.2%     0.2%     ---
Landesbank Berlin            -0.1%     0.0%     ---      ---
Landesbank BW                -0.3%     ---      ---      ---
Lloyds Tsb Bank              -0.4%    -0.2%     0.3%     ---
Maria Fiorini Ramirez        -0.3%    -0.2%     ---      ---
MET Capital Advisors          0.2%     ---      ---      ---
Modal Asset                  -0.2%     ---      ---      0.4%
Moody’s Analytics            -0.2%    -0.2%     ---      ---
Morgan Stanley               -0.6%    -0.3%     ---      0.2%
National Bank Financial      -0.4%    -0.3%     ---      ---
Natixis                      -0.3%     0.1%     ---      ---
Nomura Securities            -0.1%     0.1%     ---      0.5%
Nord/LB                      -0.2%     0.0%     ---      ---
OSK Group/DMG                -0.4%    -0.2%     ---      ---
Oxford Economics              0.1%     0.4%     ---      0.4%
Pierpont Securities          -0.3%     0.0%     ---      ---
PNC Bank                     -0.5%    -0.3%     ---      ---
Prestige Economics            0.2%     0.1%     ---      ---
Raiffeisenbank International -0.9%    -0.9%     ---      ---
Raymond James                -0.3%    -0.1%     ---      0.2%
RBC Capital Markets          -0.4%    -0.3%     ---      0.2%
Regions Financial            -0.3%    -0.2%     ---      0.2%
Scotiabank                   -0.2%     0.0%     ---      ---
SMBC Nikko Securities        -0.1%     0.3%     ---      ---
Societe Generale             -0.6%    -0.5%     0.1%     0.3%
Southern Polytechnic State    0.1%     ---      ---      ---
Standard Chartered Bank      -0.1%     ---      0.3%     ---
Stone & McCarthy             -0.4%    -0.5%     ---      ---
TD Securities                -0.3%    -0.4%     0.2%     0.1%
UBS                          -0.3%    -0.2%     0.4%     0.4%
UniCredit Research           -0.4%     ---      ---      ---
University of Maryland       -0.1%     0.2%     ---      ---
Wells Fargo & Co.            -0.2%    -0.1%     ---      ---
Westpac Banking Co.          -0.4%     ---      0.2%     ---
Wrightson ICAP               -0.4%    -0.2%     0.4%     0.4%
================================================================

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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