Data Expected to Show Strong Retail Sales Gain
A rebound in demand for autos and clothing last month helped U.S. retailers post their biggest sales increase since January, economists forecast that a report this week will show.
Purchases increased 0.8% in July after falling 0.1% in June, according to the median estimate in a Bloomberg News survey of economists before a report expected Friday from the Commerce Department. Excluding auto dealers, sales are estimated to have risen 0.5% after a 0.3% gain.
The report will come after Tuesday’s meeting of Federal Reserve policymakers, who are expected to refrain from raising interest rates for the first time since June 2004.
Strong retail sales and other evidence of economic resilience may eventually persuade central bankers to resume their campaign to quell inflation.
“Spending is still going to look healthy,” said Ellen Zentner, an economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “The economy may not slow as much as expected and the inflation pressures aren’t just going to disappear. The Fed is going to have to come back off the bench by the end of the year.”
The Fed will hold the target for the overnight bank lending rate at 5.25%, according to 65 of 90 economists surveyed by Bloomberg. The rest predict a quarter-point increase.
Rising incomes are helping Americans cope with higher mortgage payments and fuel costs, keeping consumers contributing to the expansion.
Average hourly wages were up 3.8% in July from a year earlier, according to a Labor Department report last week.
The report also showed that the economy created 113,000 jobs, fewer than economists expected, and the unemployment rate rose to 4.8% from a 4.6% rate in June that matched a five-year low.
The gain in incomes “should put a floor under spending declines, keeping the expansion alive and well,” said Scott Anderson, an economist at Wells Fargo & Co. in Minneapolis.
Sales at the biggest retailers, led by Wal-Mart Stores Inc., rose more than expected last month as unusually hot weather stimulated demand for summer clothing, air conditioners and back-to-school items. Purchases rose 3.5% compared with last year, a percentage point more than forecast, according to the International Council of Shopping Centers.
“We still see the consumer wanting to get out and get to the mall,” said Michael Glimcher, chief executive of Glimcher Realty Trust, which owns and manages 27 shopping malls across the U.S., in an interview last week. “There is no great gain, but there is no loss of traction either.”
Auto sales rebounded last month. July sales reached an annual rate of 17.2 million cars and light trucks, up from 16.3 million a month earlier and the most since January, industry reports last week showed.
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The Week Ahead
Today
* Treasury bill auction.
* Federal Reserve reports on consumer credit for June.
Tuesday
* Labor Department reports preliminary data on second-quarter productivity and costs.
* Federal Reserve’s Open Market Committee meets to discuss interest rates.
* Quarterly earnings reports due from Cisco Systems Inc., Cablevision Systems Corp., Charter Communications Inc., Clear Channel Communications Inc., DirecTV Group Inc., Gemstar-TV Guide International Inc., News Corp., Sara Lee Corp.
Wednesday
* Federal Communications Commission opens multi-round spectrum auction for advanced wireless services.
* Quarterly earnings reports due from Walt Disney Co., Federated Department Stores Inc., American International Group Inc., Viacom Inc., Delta Air Lines Inc., Dynegy Inc., Liberty Media Holding Corp., Tenet Healthcare Corp.
Thursday
* Labor Department reports on weekly jobless claims.
* Commerce Department reports on international trade for June.
* Treasury Department reports on federal budget for July.
* Freddie Mac reports on mortgage rates.
* Quarterly earnings reports due from J.C. Penney Co., Target Corp.
Friday
* Sentencing set for former Wal-Mart executive Tom Coughlin on tax and wire fraud charges.
* Commerce Department reports on retail sales for July and business inventories for June.
