Upbeat Retail Data Expected in U.S. Report

L.A. Times Archives

July 10, 2006 12 AM PT

From Times Wire Services

Rising incomes and stable gasoline prices spurred a rebound in consumer spending last month that will help sustain U.S. economic growth, economists said in advance of a Commerce Department report due this week.

They expect the report Friday to show that retail sales increased 0.4% in June after rising 0.1% the previous month. Purchases excluding autos also rose 0.4%, according to the median estimate of economists surveyed by Bloomberg News.

The annual wage gain through June, the biggest in five years, enabled Americans to keep spending even as payrolls expanded less than expected. Consumer confidence also is rebounding as gasoline prices plateau, raising the odds that spending will keep growing.

“The consumer is going to remain relatively strong in the second half of the year,” said Bill Mulvihill, a senior economist at First Trust Advisors in Lisle, Ill. “The economy keeps growing, employment is healthy, and incomes are rising. Those are all strong fundamentals for the consumer.”

Employees’ average hourly earnings rose 3.9% in the 12 months ended in June, the biggest gain since 2001, a Labor Department report last week showed. Employers added a net 121,000 workers last month as the jobless rate held at 4.6%.

An increase in auto sales probably paced the rebound in spending last month. Automakers sold at an annualized rate of 16.3 million vehicles in June, compared with 16.1 million the previous month, according to industry reports last week. A sales gain by Asian manufacturers, led by demand for fuel-efficient models, more than offset slower sales by American makers.

A gallon of regular gasoline cost an average of $2.87 in June compared with $2.89 a month earlier, according to AAA, the automobile association.

That slight drop “will also be instrumental in freeing up income for broader consumer spending,” said John Shin, an economist at Lehman Bros. Inc. in New York. “Retail sales should end the quarter with a decent showing by the consumer.”

Sales at building material and furniture stores probably will rebound after dropping in May because the housing market has been more resilient than expected, Shin said.

The Week Ahead

Today

* Henry M. Paulson Jr. is sworn in as Treasury secretary by Chief Justice John Roberts.

* Federal Reserve reports on consumer credit for May.

Tuesday

* Genentech releases second-quarter earnings.

Wednesday

* Commerce Department reports on international trade for May.

* Gannett reports second-quarter earnings.

Thursday

* Labor Department reports on weekly jobless claims.

* Treasury reports on federal budget for June.