Slight Gains Expected in Spending, Construction

Economic reports this week on monthly consumer spending and home building are expected to show slight gains.

That may lead Federal Reserve policymakers to say the economy hasn’t weakened enough to warrant a 12th reduction in interest rates when they meet Tuesday.

Retail sales probably rose 1.2% in July, the third gain in four months, according to the median of 47 forecasts in a Bloomberg News survey. New home construction probably increased 0.4%, the survey showed. The retail sales statistics will be released by the Commerce Department on Tuesday and the housing figures Friday.

Consumer spending accounts for more than two-thirds of the economy, and consumers have been taking advantage of interest-free loans on purchases of new cars made by General Motors Corp. and other auto makers, aided by Fed rate cuts.

Meanwhile, a report Thursday from the Fed probably will show that industrial production was unchanged in July, after output at the nation’s factories, mines and utilities surged 0.8% in June. July would be the weakest month this year.

Other reports this week:

* Wednesday, the Commerce Department is expected to report that business inventories rose 0.1% in June following a 0.2% increase in May.

* Thursday, the Philadelphia Fed’s index of manufacturing business in the region probably rose to 7.8 in August after slumping to 6.6 a month earlier, which was the lowest reading this year. Still, the index has been above zero, the dividing line between growth and contraction, since January.

* Friday, the University of Michigan is expected to report that its preliminary consumer sentiment index for this month increased to 89 from 88.1 in July.