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Retail Sales Probably Stagnated in June: U.S. Economy Preview

Sales at U.S. retailers probably stagnated in June, reflecting declining auto demand and rising unemployment, economists said before reports this week.

The projected unchanged reading in purchases would follow a 0.2 percent May decrease, according to the median forecast in a Bloomberg News survey ahead of Commerce Department figures July 14. Another report may show the cost of living decreased for the first time in a year as fuel prices retreated.

Supply constraints due to Japan’s earthquake helped push car sales last month to the lowest level since June 2010, while unemployment prompted stores like Target Corp. and Gap Inc. to sweeten discounts to lure customers. A dearth of jobs raises the risk that consumer spending, which makes up 70 percent of the economy, will have difficulty picking up for the rest of 2011.

“You’ve got a consumer who’s hobbled,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York. “The soft patch is still there. The underlying trend is toward very modest growth.”

Ben S. Bernanke may address the issue of unemployment when he delivers the semi-annual monetary policy report to Congress on July 13 and 14. The chairman of the Federal Reserve, in a press conference after policy makers met on June 22, said “the economic recovery appears to be proceeding at a moderate pace, though somewhat more slowly than the committee had expected.” Minutes of the gathering will be issued on July 12.

Bernanke also said the slowdown was caused in part by “factors that are likely to be temporary,” including more expensive commodities as well as supply chain disruptions associated with Japan’s natural disaster.

Excluding Autos

The retail report may also show sales excluding automobiles and service stations rose 0.4 percent last month after increasing 0.3 percent in May, economists said.

The figures, which aren’t adjusted for inflation, probably were depressed by receipts at service stations that reflected lower gasoline costs. Regular fuel averaged $3.67 a gallon in June, down from $3.90 the prior month, according to AAA, the nation’s biggest auto club.

Discounts implemented to clear inventory ahead of the back-to-school season helped sales at chain stores beat analysts’ estimates. Target, the second-largest U.S. discount retailer, posted a 4.5 percent increase from a year earlier, while demand at Gap rose 1 percent, beating projections for a drop, the stores reported last week.

The Standard & Poor’s Supercomposite Retailing Index has risen 2.6 percent from the end of April. The broader S&P 500 Index declined 1.5 percent during the same period as the European debt crisis and a U.S. debt-ceiling impasse concerned investors.

Unemployment Climbs

Payrolls grew by 18,000 last month, the smallest gain since September, the Labor Department reported July 8. The jobless rate climbed for a third straight month, rising to 9.2 percent, the highest level this year.

Sales of cars and light vehicle ran at a seasonally adjusted 11.41 million annual rate in June, down from 11.76 million in May and 13.14 million in April, according to researcher Autodata Corp. Toyota Motor Corp. and Honda Motor Co. deliveries each fell 21 percent from the same month last year, reflecting supply-chain constraints, while General Motors Co. and Ford Motor Co. said sales rose 10 percent.

The consumer-price index fell 0.1 percent in June after a 0.2 percent gain in May, reflecting the drop in fuel costs, economists projected a Labor Department report on July 15 will show. Core prices, which exclude volatile food and fuel, may have climbed 0.2 percent from a month earlier.

Prices Fall

The consumer-price index is the broadest of three monthly price gauges the Labor Department releases. Figures earlier in the week may show wholesale prices and the cost of goods imported into the U.S. also fell in June.

Falling fuel prices may have also helped boost confidence. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment rose to 72.5 in June from 71.5 in May, according to the Bloomberg survey median ahead of the July 15 report.

Manufacturing is one area of the economy still expanding. Fed data due the same day will show output at factories, mines and utilities rose 0.3 percent in June following a 0.1 percent gain the prior month, economists forecast.

Also this week, Commerce Department figures may show the trade deficit widened in May from the prior month, according to the Bloomberg survey median before the July 12 report.

                        Bloomberg Survey

                        Release    Period    Prior     Median
Indicator                 Date               Value    Forecast
Trade Balance $ Blns      7/12      May      -43.7     -44.0
PPI  MOM%                 7/14      June      0.2%     -0.2%
Core PPI MOM%             7/14      June      0.2%      0.2%
Retail Sales MOM%         7/14      June     -0.2%      0.0%
Retail ex-autos MOM%      7/14      June      0.3%      0.1%
Retail exauto/gas MOM%    7/14      June      0.3%      0.4%
Initial Claims ,000’s     7/14     9-Jul       418       412
Business Inv. MOM%        7/14      May       0.8%      0.8%
CPI MOM%                  7/15      June      0.2%     -0.1%
Core CPI MOM%             7/15      June      0.3%      0.2%
Industrial Production     7/15      June      0.1%      0.3%
Univ. of Mich             7/15      July P    71.5      72.5

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