U.S. retail sales barely rose in October and high oil prices kept the trade deficit in September near a record, economists predicted, suggesting that increased hiring will do little to keep the economy from slowing in coming months.
“Consumers are continuing to buy, but with $50 oil and $2 gasoline, that can only go so far,” said Gina Martin, an economist at Wachovia Corp. in Charlotte, N.C. “Despite the fact that employment is increasing and will help to fuel spending, the economy is going to be more a function of higher oil and gasoline prices.”
Economists surveyed by Bloomberg News predicted the government would report this week that there was a 0.1% gain in retail receipts in October; they rose 1.5% a month earlier.
As for the trade gap, it may well come in at $54 billion for September, matching August’s shortfall as the second-highest on record, according to the survey.
Also on tap in Washington this week is a meeting of policymakers at the Federal Reserve, which is likely to raise its benchmark interest rate by a quarter of a percentage point to 2%. That would make capital harder to come by, reducing prices and keeping inflation in check.
Some analysts believe that the economy is ripe for inflation to take hold, now that the summer’s economic “soft patch” -- slow job growth, high energy prices and lackluster consumer spending -- looks like it may be over.
But according to a forecast by economists at Credit Suisse First Boston in New York, consumer spending will grow at a 2.5% annual pace this quarter compared with a 4.6% pace from July through September. Spending rose an average of 3.7% per quarter in the last decade.
A drop in auto purchases in October may be behind the expected retail sales numbers for the month. Cars and light trucks sold at a 17-million annual pace compared with 17.5 million in September, according to industry figures released last week. The decline would have been larger if not for a jump in purchases of imported vehicles. Asian-based brands such as Toyota, Honda and Nissan took a record share of the auto market last month.
Excluding autos, sales probably rose 0.6% in October, matching the September gain, according to the Bloomberg survey. A jump in receipts at service stations, due in part to higher gasoline prices, and more purchases at building supply stores as people in the Southeast repaired damage from the September hurricanes, probably led the advance, the economists said.
Imports are rising as higher oil prices cause the nation’s foreign energy bill to swell. Higher gasoline prices have also crimped sales at Wal-Mart Stores Inc. and other discounters as consumers are left with less money to spend.
With the holidays ahead, “the consumer is still the big question mark,” said David Legeay, senior vice president and director of portfolio management at McDonald Financial Group.