Data Likely to Show Weaker Consumption
Spending at U.S. retailers declined in September and consumer optimism soured early this month, signs that the economy’s biggest source of strength may be starting to fade, reports this week are likely to show.
Retail sales fell 1.1% in September, the first decrease in four months, the Commerce Department is expected to report Friday. The University of Michigan probably will report the same day that its consumer sentiment index fell this month to 85.2, the weakest since November.
The statistics suggest a pall over the economy at the beginning of the final three months of the year, which include the holiday shopping season. Consumer spending accounts for about two-thirds of gross domestic product, and though such spending was strong enough last year to make the recession one of the mildest on record, pent-up demand is lacking.
Most of the expected decline in retail sales will reflect the weakest month for auto dealers since May. New cars and light trucks sold at a 16.3-million-unit annual rate in September, down from an 18.7-million-unit pace a month earlier.
Excluding auto dealers, sales at retailers probably rose 0.1%. That is one-fourth the August increase and is expected because of weak results at department stores.
Also this week, the Labor Department is expected to report Thursday for a seventh straight week that more than 400,000 people applied for unemployment insurance benefits in the week ended Saturday. That is a level for initial claims that economists say is consistent with a weak job market.
Discounting by automakers and other producers to lure customers is keeping a lid on inflation. The producer price index probably rose 0.1% last month after showing no change in August, the Labor Department is expected to report Friday. Through August, the price of goods at the wholesale level was 1.6% lower than a year ago, Labor Department figures showed a month ago.
Excluding volatile food and energy prices, the so-called core index for producer prices probably rose 0.1% in September after a 0.1% decline. For the 12 months ended in August, core prices fell 0.3%, the largest decline on record.
Higher costs for imported oil as rising Middle East tensions stoked concern that supplies might be disrupted probably led to a 0.3% increase in the Labor Department’s import price index, scheduled for release Thursday. Prices of imported goods were down 1.3% over the 12 months ended in August.
Other reports this week:
* Today, the Fed will report on consumer borrowing in August.
Fed Chairman Alan Greenspan addresses the American Bankers Assn. annual convention.
* Thursday, the Commerce Department will report on wholesale inventories in August.
