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US retail sales probably increased in July

Reports may show cost of living increased and factory production climbed

Gulf News

Washington: Sales at US retailers probably rose in July for the first time in four months as employment picked up, easing concern the expansion is faltering, economists said before reports this week.

The projected 0.3 per cent advance in purchases would follow a 0.5 per cent drop in June, according to the median forecast of 65 economists surveyed by Bloomberg News ahead of the US Commerce Department figures on Tuesday, August 14. Other reports may show the cost of living increased and factory production climbed last month.

Gains in purchases at places like Gap and Macy’s indicate American households are looking beyond the global economic slowdown as hiring improves. At the same time, unemployment in excess of 8 per cent is thwarting a binge in spending as consumers look to repair finances and pay down debt.

“Consumer spending growth remains quite subdued,” said Ryan Wang, an economist at HSBC Securities USA in New York. “Consumers are still trying to rebuild savings, which basically keeps spending growth in this moderate range.”

Households struggled to support the expansion last quarter. Consumer purchases, about 70 per cent of the economy, grew at a 1.5 per cent annual rate from April to June, the weakest in a year, according to Commerce Department data.

Economists project the retail sales category in the report used to calculate gross domestic product, which excludes auto dealers, building-material stores and service stations, will show a 0.4 per cent gain in July following a 0.1 per cent decline the prior month.

Sales Improve

July’s increase comes after same-store sales at the more than 20 companies tracked by Retail Metrics Inc. rose 4.4 per cent that month, almost four times analysts’ estimates, compared with a 0.3 per cent increase in June.

Sales at Gap, the biggest US speciality-apparel retailer, climbed 10 per cent last month from the same period in 2011. Macy’s, the owner of its namesake and Bloomingdale’s department stores, posted a 4.1 per cent gain.

“This month we saw broad-based strength across the US,” Sherry Lang, spokeswoman for TJX Cos., said during an August 2 sales conference call. Same-store sales at the owner of the Marshalls and T.J. Maxx chains rose 7 per cent in July.

Underpinning the stronger sales, payrolls increased by 163,000 in July, the most in five months, according to Labour Department figures. While the improvement eased fears the US labor market might continue stumbling following a second-quarter slowdown, the jobless rate rose to 8.3 per cent.

Production climbs

Sustained gains in retail sales may stimulate manufacturing, which is receiving fewer orders as economies in Europe and Asia slow. So far this year, automobile production has kept factory assembly lines busy.

Output at the nation’s factories, mines and utilities probably rose 0.5 per cent in July after a 0.4 per cent gain the previous month, economists forecast a Federal Reserve report will show on Wednesday, August 15.

The hottest July in the lower 48 states in 117 years of records probably drove some of the production gains as Americans used more electricity to run air conditioners. The temperature last month averaged 77.6 degrees Fahrenheit (25.3 Celsius), or 3.3 degrees above normal, according to data from the National Oceanic and Atmospheric Administration.

Also on Wednesday, a US Labour Department report will probably show the consumer-price index increased 0.2 per cent in July after an unchanged reading the prior month, according to the survey median. Prices are projected to rise 1.6 per cent over the past year, down from 1.7 per cent in June.

Fed’s View

Fed official said they believe inflation would run “at or below” their goal of 2 per cent, according to a statement from the Federal Open Market Committee on August 1. Their preferred price gauge, issued by the Commerce Department and tied to consumer spending, rose 1.5 per cent in the 12-months-ended June, matching the smallest gain in more than a year.

Investors agree with that outlook. The difference in yields between 5-year notes and Treasury Inflation Protected Securities, or TIPS, which represents traders’ expectations for the rate of inflation over the life of the bonds, fell to 1.90 per centage points at 4:54 p.m. in New York on Friday.