Retail Sales Probably Climbed in July: U.S. Preview

Retail sales probably rose for a fourth consecutive month in July, showing the U.S. economy is breaking free of the effects of higher taxes and budget cuts, economists said before reports this week.

Purchases climbed 0.3 percent after a 0.4 percent advance in June, according to the median forecast of 64 economists surveyed by Bloomberg before Commerce Department figures on Aug.

13. Other data may show gains in manufacturing, residential construction and consumer prices last month.

Employment gains and increased household wealth tied to higher home and stock prices are giving Americans the confidence to spend, brightening the economic outlook. Low borrowing costs are spurring vehicle sales at General Motors Co. and Ford Motor Co., helping bolster industrial production at the same time builders start work on more homes.

“Growth will accelerate in the second half of the year,” said Brian Jones, a senior U.S. economist at Societe Generale in New York. “The labor market continues to improve. Now that we’re working again, let’s go shopping.”

Payrolls have increased an average 192,000 a month this year through July compared with 182,750 in 2012, according to the Labor Department. The jobless rate in July fell to 7.4 percent, the lowest since December 2008 and down from 7.8 percent at the end of last year.

Automakers are enjoying their best year since 2007, with U.S. sales on track to reach 15.8 million, according to Autodata Corp. Last week, GM, Ford, Chrysler Group LLC, and Honda Motor Co. said they are working to boost capacity. Chrysler is adding almost 300 jobs at a Michigan engine plant and Honda will invest $215 million at facilities in Ohio.

Industrial Production

A report from the Federal Reserve on Aug. 15 is projected to show production at the nation’s factories, mines and utilities climbed 0.3 percent in July for a second month, according to the Bloomberg survey median.

A pair of regional reports this week from the Fed may show manufacturing kept expanding in August.

Cars and trucks sold at a 15.7 million annualized rate last month after a 15.8 million pace in June, the strongest back-to-back readings since the end of 2007, according to figures from Ward’s Automotive Group.

“We’re at the beginning of a broad-based recovery for the economy in auto retail,” said Michael Jackson, chairman and chief executive officer of AutoNation Inc., in Fort Lauderdale, Florida. The largest U.S. auto-dealership group last month reported record earnings per share in the second quarter. “As we look at the rest of 2013, we believe that the improvement in new vehicle sales will continue,” Jackson said on a July 18 earnings call.

Spending Gains

The gains in consumer spending, which accounts for about 70 percent of the economy, are extending to restaurants including McDonald’s Corp. and shopping mall developers such as Rouse Properties Inc. in New York. Luxury goods makers also are rebounding, with LVMH Moet Hennessy, Louis Vuitton SA and Gucci-owner Kering SA last month reporting accelerating sales.

Investors have taken note of the improving outlook. The Standard & Poor’s GICS Consumer Discretionary Sector Index, which encompasses companies that tend to be the most sensitive to swings in the economy including AutoNation, climbed 5.9 percent in the two months through Aug. 9. The S&P 500 Index was up 2.9 percent over the same period.

Americans’ confidence is improving, a report on Aug. 16 is forecast to show. The Thomson Reuters/University of Michigan preliminary August consumer sentiment index may climb to a six-year high of 85.3 from a final July reading of 85.1.

Housing Rebound

While auto dealers and their customers are benefiting from the Fed’s efforts to hold down borrowing costs to spur the expansion, homebuilders are also enjoying historically low rates.

A report from the Commerce Department on Aug. 16 is forecast to show housing starts climbed in July to a 905,000 annualized rate from an 836,000 pace in June, which was the slowest in almost a year. In a sign construction will keep advancing, building permits are projected to increase to a 948,000 rate from 918,000 the prior month.

The average rate on 30-year fixed mortgage was 4.4 percent in the week ended Aug. 8, according to figures from Freddie Mac. They’re about a percentage point higher than the all-time low reached in November.

Finally, a Labor Department report on Aug. 15 is forecast to show consumer prices climbed 0.2 percent in July after a 0.5 percent gain a month earlier. The core measure, which excludes volatile food and energy costs, increased 0.2 percent for a third month, the Bloomberg survey showed.

                        Bloomberg Survey

                        Release    Period    Prior     Median
Indicator                 Date               Value    Forecast
Federal Budget $ Blns     8/12      July     -69.6     -94.5
NFIB Optimism Index       8/13      July      93.5      94.5
Import Prices MOM%        8/13      July     -0.2%      0.8%
Import Prices YOY%        8/13      July      0.2%      1.5%
Retail Sales MOM%         8/13      July      0.4%      0.3%
Retail ex-autos MOM%      8/13      July      0.0%      0.4%
Retail exauto/gas MOM%    8/13      July     -0.1%      0.4%
Retail control MOM%       8/13      July      0.1%      0.4%
Business Inv. MOM%        8/13      June      0.1%      0.2%
PPI  MOM%                 8/14      July      0.8%      0.3%
Core PPI MOM%             8/14      July      0.2%      0.2%
PPI  YOY%                 8/14      July      2.5%      2.4%
Core PPI YOY%             8/14      July      1.7%      1.3%
Empire Manu. Index        8/15      Aug.      9.5       10.0
CPI  MOM%                 8/15      July      0.5%      0.2%
Core CPI MOM%             8/15      July      0.2%      0.2%
CPI  YOY%                 8/15      July      1.8%      2.0%
Core CPI YOY%             8/15      July      1.6%      1.7%
Core CPI SA Index         8/15      July    233.643   234.041
CPI NSA Index             8/15      July    233.504   233.736
Initial Claims ,000’s     8/15     10-Aug     328       335
Cont. Claims ,000’s       8/15     3-Aug      3018      3000
Total TICS $ Blns         8/15      May       56.4      30.0
Net Long Term TICS $ Bl   8/15      June     -27.2     -10.0
Ind. Prod. MOM%           8/15      July      0.3%      0.3%
Cap. Util. %              8/15      July     77.8%     77.9%
Manu. Prod. MOM%          8/15      July      0.3%      0.2%
Philly Fed Index          8/15      Aug.      19.8      15.0
NAHB Housing Index        8/15      Aug.       57        57
Housing Starts ,000’s     8/16      July      836       905
Housing Starts MOM%       8/16      July     -9.9%      8.3%
Building Permits ,000’s   8/16      July      918       948
Building Permits MOM%     8/16      July     -6.8%      3.2%
Productivity QOQ%         8/16       2Q       0.5%      0.6%
Labor Costs QOQ%          8/16       2Q      -4.3%      1.3%
U of Mich Conf. Index     8/16     Aug. P     85.1      85.3
BCCI                      8/15    Aug. 12    -23.5      n/a
Before it's here, it's on the Bloomberg Terminal.