Consumer Spending in U.S. Probably Rose by Most in Five Months

Consumer Spending in U.S. Climbs for First Time in Three Months
Women's jeans hang on display at The Gap Inc's new Piperlime store in the Soho neighborhood of New York, on Aug. 29, 2012. Photographer: Peter Foley/Bloomberg

Aug. 30 (Bloomberg) -- Consumer spending in the U.S. probably climbed in July by the most in five months, economists said before a report today.

Household purchases, which account for about 70 percent of the economy, rose 0.5 percent last month after being little changed in June, according to the median estimate of 76 economists surveyed by Bloomberg.

Rising purchases suggest consumers bounced back last month after scrimping in June and May, which may set the stage for faster third-quarter economic growth. Even so, costlier gasoline and a jobless rate that has exceeded 8 percent since early 2009 threaten to limit spending gains in the second half of 2012.

“Households spent a little bit more in July, which is encouraging given that over the previous few months spending pretty much stagnated,” said Paul Dales, senior U.S. economist at Capital Economics Ltd. in London. “If we jump forward, I get a bit worried again. I don’t really expect there to be big improvements in household spending in the next few months.”

The Commerce Department will release the spending report at 8:30 a.m. in Washington. Economists’ forecasts ranged from gains of 0.2 percent to 0.7 percent. Spending fell 0.1 percent in May.

The report may also show incomes grew 0.3 percent after increasing 0.5 percent in June, according to the survey median.

An early indicator of consumer purchases, retail sales rose 0.8 percent in July, the most in five months, Commerce Department data showed Aug. 14. Receipts climbed in all 13 sales categories, the first time that’s happened since 2005.

‘Quite Good’

“The back-to-school business has been really quite good,” Ed Stack, chairman and chief executive officer of Dick’s Sporting Goods Inc., said during an Aug. 14 earnings call. The Coraopolis, Pennsylvania-based retailer this month boosted its forecast for full-year earnings. “We’ve been very pleased with our business,” he said.

Retail shares have outperformed the broader market this year. The Standard & Poor’s 500 Supercomposite Retailing Index has climbed 24 percent since Dec. 30, compared with a 12 percent gain in the broader S&P 500.

A pickup in employment growth shored up household purchasing power last month. Payrolls rose by 163,000 workers in July, the most since February, according to Labor Department data. At the same time, the jobless rate rose to 8.3 percent, the highest level in five months.

Sustained consumer demand would boost the pace of economic expansion in the U.S. Americans’ purchases increased at a 1.7 percent annual rate in the second quarter, the smallest advance in a year.

Spending Forecast

Economists project consumer spending will increase at a 2 percent rate in the third quarter, according to the median forecast of 78 economists surveyed from Aug. 3 to Aug. 8.

Faster economic growth driven by household spending will probably hinge on bigger job gains. Measures of sentiment, nonetheless, indicate employment prospects are not picking up. The Conference Board’s index of consumer confidence fell in August by the most in 10 months, and the Bloomberg Consumer Comfort Index dropped in the week ended Aug. 19 to the lowest level since January.

Gasoline prices present an additional obstacle. The average price of a gallon of regular gasoline climbed 28 cents since July 30 to reach $3.80 on Aug. 28, according to AAA, the nation’s largest auto club. Prices at the pump will be the highest ever for the U.S. Labor Day holiday, AAA forecast.

                       Bloomberg Survey
================================================================
                              Pers     Pers Core PCE  Initial
                               Inc    Spend   Prices   Claims
                              MOM%     MOM%     MOM%   ,000’s
================================================================
Date of Release              08/30    08/30    08/30    08/30
Observation Period            July     July     July   25-Aug
----------------------------------------------------------------
Median                        0.3%     0.5%     0.1%      370
Average                       0.3%     0.5%     0.1%      371
High Forecast                 0.6%     0.7%     0.2%      380
Low Forecast                  0.1%     0.2%     0.0%      363
Number of Participants          73       76       47       50
Previous                      0.5%     0.0%     0.2%      372
----------------------------------------------------------------
4CAST                         0.3%     0.4%     0.1%      367
ABN Amro                      0.3%     ---      ---       365
Action Economics              0.3%     0.5%     0.1%      371
Ameriprise Financial          0.3%     0.5%     0.1%      370
Bank of the West              0.3%     0.5%     0.1%      368
Bank of Tokyo-Mitsubishi      0.3%     0.6%     ---       375
Barclays                      0.4%     0.4%     0.1%      370
Bayerische Landesbank         0.4%     0.4%     ---      ---
BBVA                          0.2%     0.4%     ---       367
BMO Capital Markets           0.4%     0.4%     0.1%      370
BNP Paribas                   0.3%     0.4%     ---       368
BofA Merrill Lynch            0.3%     0.5%     ---       375
Briefing.com                  0.2%     0.5%     0.1%      370
Capital Economics             0.3%     0.4%     0.1%     ---
CIBC World Markets            0.3%     0.6%     ---      ---
Citi                          0.3%     0.5%     0.1%      370
ClearView Economics           0.3%     0.5%     0.2%     ---
Comerica                      0.2%     0.2%     ---      ---
Commerzbank AG                0.6%     0.4%     0.1%      370
Credit Agricole CIB           0.3%     0.4%     0.1%     ---
Credit Suisse                 0.2%     0.5%     0.1%      365
Danske Bank                   0.2%     0.5%     0.1%     ---
DekaBank                      0.3%     0.4%     0.1%     ---
Desjardins Group              0.4%     0.5%     0.1%      370
Deutsche Bank Securities      0.4%     0.4%     0.2%      370
Deutsche Postbank AG          ---      0.5%     ---      ---
DZ Bank                       0.2%     0.4%     ---      ---
Exane                         ---      0.5%     ---      ---
First Trust Advisors          0.3%     0.5%     ---       369
FTN Financial                 0.3%     0.4%     0.1%     ---
Goldman, Sachs & Co.          0.5%     0.4%     0.2%     ---
Helaba                        0.3%     0.5%     0.2%      370
High Frequency Economics      0.3%     0.5%     0.1%      370
Horizon Investments           0.1%     0.3%     0.0%     ---
Hugh Johnson Advisors         0.3%     0.4%     ---       370
IDEAglobal                    0.3%     0.4%     0.1%      365
IHS Global Insight            0.3%     0.5%     0.1%      370
Informa Global Markets        0.2%     0.4%     ---       375
ING Financial Markets         0.2%     0.5%     0.1%      365
Insight Economics             0.3%     0.4%     0.1%      365
Intesa Sanpaulo               0.3%     0.4%     0.2%     ---
J.P. Morgan Chase             0.3%     0.4%     0.0%      370
Janney Montgomery Scott       0.2%     0.5%     0.1%     ---
Jefferies & Co.               0.3%     0.4%     ---       380
John Hancock Financial        ---      ---      ---       364
Landesbank Berlin             0.3%     0.5%     ---       365
Landesbank BW                 0.3%     0.5%     ---      ---
Lloyds Bank                   0.3%     0.5%     ---       375
Maria Fiorini Ramirez         0.3%     0.5%     0.1%      370
Market Securities             ---      0.5%     ---      ---
Mizuho Securities             0.2%     ---      ---       375
Moody’s Analytics             0.3%     0.6%     0.2%      372
Morgan Stanley & Co.          0.3%     0.5%     ---       375
National Bank Financial       0.3%     0.5%     ---      ---
Natixis                       ---      0.5%     ---      ---
Newedge                       0.3%     0.5%     ---      ---
Nomura Securities             0.4%     0.6%     0.2%     ---
Nord/LB                       0.3%     0.4%     ---       370
OSK Group/DMG                 0.3%     0.4%     0.1%     ---
Pierpont Securities           0.3%     0.4%     0.1%      372
PineBridge Investments        0.2%     0.5%     ---       368
PNC Bank                      0.3%     0.4%     ---      ---
Raiffeisenbank International  0.3%     0.4%     0.1%     ---
Raymond James                 0.3%     0.5%     0.1%      370
RBC Capital Markets           0.3%     0.5%     ---       380
RBS Securities                0.3%     0.3%     0.1%      380
Regions Financial             0.3%     0.5%     ---      ---
Renaissance Macro Research    0.3%     0.6%     0.1%     ---
Scotiabank                    0.1%     0.7%     0.1%      370
SMBC Nikko Securities         0.3%     0.5%     0.1%     ---
Societe Generale              0.3%     0.3%     0.1%      377
Southern Polytechnic State    ---      ---      ---       363
Standard Chartered            0.3%     0.4%     ---       366
Stone & McCarthy              0.2%     0.4%     ---       375
TD Securities                 0.4%     0.4%     0.1%      375
UBS                           0.3%     0.4%     0.1%      375
University of Maryland        0.3%     0.3%     0.1%     ---
Wells Fargo & Co.             0.4%     0.4%     0.1%     ---
WestLB AG                     0.2%     0.5%     0.1%      375
Wrightson ICAP                ---      0.4%     0.1%      370
================================================================

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