Retail Sales Probably Declined in April: U.S. Economy Preview

Retail sales probably fell in April for a second consecutive month and manufacturing stalled, indicating the world’s largest economy is cooling, economists said before reports this week.

The 0.3 percent drop in purchases would follow a 0.4 percent decline in March, according to the median forecast of 74 economists surveyed by Bloomberg ahead of Commerce Department figures tomorrow. Excluding automobiles and gasoline, sales probably climbed. Other data may show industrial production decreased in April.

Vehicle sales are leveling off as Americans cope with higher taxes, which combined with automatic federal spending cuts, are projected to slow growth this quarter. At the same time, other reports this week may show homebuilding continues to be a bright spot and the cost of living remains contained, signs that the expansion is unlikely to be derailed.

“I wouldn’t expect consumers to rein in their horns a lot,” said Paul Edelstein, director of financial economics at IHS Global Insight in Lexington, Massachusetts. “The fiscal tightening is a negative for growth. Even when the economy is growing slowly, housing is going to do much better.”

Higher taxes may be starting to squeeze household budgets this quarter, prompting Americans to rebuild savings. 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.

Auto Sales

Demand for automobiles leveled off in April, when cars and light trucks sold at a 14.9 million annual pace, 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.

Falling gasoline prices also hurt service-station receipts as the Commerce Department’s retail 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.

At the same time, the lower fuel costs are bringing relief to households.

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 Cos., the owner of T.J. Maxx and Marshalls stores, while Ross Stores Inc. had a 7 percent gain. Results at both chains exceeded analysts’ forecasts.

‘Strong’ May

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.”

Among chains that didn’t do so well was L Brands Inc. 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 index.

Industrial production fell 0.1 percent in April, following a 0.4 percent gain in March that was driven by electricity and natural-gas use due to colder-than-normal temperatures, economists in the Bloomberg survey projected ahead of Federal Reserve data on May 15. The report may show manufacturing, which makes up 75 percent of total production, was little-changed.

May Manufacturing

Manufacturing may pick up in May, economists forecast ahead of regional reports from the Fed this week. Factories in the Philadelphia and New York areas are projected to expand at a faster pace.

Housing may have cooled last month from jumping to an almost five-year high in March, a Commerce Department report may show on May 16. Builders began work on 973,000 homes at an annualized rate in April after a 1.04 million pace that was the strongest since June 2008, according to the Bloomberg survey median. Permits, a sign of future construction, are forecast to have climbed.

At the same time, mortgage rates near record lows and rising demand indicate residential real-estate will keep improving. The National Association of Home Builders/Wells Fargo index of builder confidence rose in May to 43, the first gain in five months, economists projected. The data is due May 15.

Also due this week, three reports from the Labor Department may show inflation remained under control. The import price gauge and an index of wholesale prices both declined in April, economists forecast. The consumer price index, to be released on May 16 and the broadest of the three measures, fell 0.3 percent, the second consecutive drop, according to the survey median.

                         Bloomberg Survey

                        Release    Period    Prior     Median
Indicator                 Date               Value    Forecast
Retail Sales MOM%         5/13     April     -0.4%     -0.3%
Retail ex-autos MOM%      5/13     April     -0.4%     -0.2%
Retail exauto/gas MOM%    5/13     April     -0.1%      0.3%
Retail control MOM%       5/13     April     -0.2%      0.3%
Business Inv. MOM%        5/13     March      0.1%      0.3%
NFIB Optimism Index       5/14     April      89.5      90.5
Import Prices MOM%        5/14     April     -0.5%     -0.5%
Import Prices YOY%        5/14     April     -2.7%     -3.1%
Empire Manu. Index        5/15      May       3.1       4.0
PPI  MOM%                 5/15     April     -0.6%     -0.6%
Core PPI MOM%             5/15     April      0.2%      0.1%
PPI  YOY%                 5/15     April      1.1%      0.8%
Core PPI YOY%             5/15     April      1.7%      1.7%
Net Long Term TICS $ Bl   5/15     March     -17.8      35.0
Ind. Prod. MOM%           5/15     April      0.4%     -0.1%
Cap. Util. %              5/15     April     78.5%     78.3%
Manu. Prod. MOM%          5/15     April     -0.1%      0.0%
NAHB Housing Index        5/15      May        42        43
CPI  MOM%                 5/16     April     -0.2%     -0.3%
Core CPI MOM%             5/16     April      0.1%      0.2%
CPI  YOY%                 5/16     April      1.5%      1.3%
Core CPI YOY%             5/16     April      1.9%      1.8%
CPI NSA Index             5/16     April    232.773   232.690
Housing Starts ,000’s     5/16     April      1036      973
Housing Starts MOM%       5/16     April      7.0%     -6.1%
Building Permits ,000’s   5/16     April      907       941
Building Permits MOM%     5/16     April     -3.4%      3.7%
Initial Claims ,000’s     5/16     11-May     323       330
Cont. Claims ,000’s       5/16     4-May      3005      3003
Philly Fed Index          5/16      May       1.3       2.1
U of Mich Conf. Index     5/17    April P     76.4      77.9
LEI  MOM%                 5/17     April     -0.1%      0.2%
Before it's here, it's on the Bloomberg Terminal.