Bloomberg News

Retail Sales in U.S. Probably Dropped as Auto Demand Slumped

June 14, 2011

June 14 (Bloomberg) -- Sales at U.S. retailers probably fell in May as car purchases slumped and elevated gasoline costs held back spending on other goods, economists said before a report today.

The 0.5 percent drop in purchases, the first decline in 11 months, would follow a 0.5 percent gain in April, according to the median forecast of 81 economists surveyed by Bloomberg News. A separate report may show inflation at the wholesale level eased last month.

Limited Brands Inc. is among chains that missed analysts’ estimates for May as fuel prices climbed to the highest level in almost three years and unemployment topped 9 percent. Ebbing energy costs and a rebound in autos following the disaster in Japan mean household purchases, which account for about 70 percent of the economy, may improve in the next six months.

“The story of May retail sales is the decline in auto sales more than anything else,” said Millan Mulraine, senior U.S. strategist at TD Securities in New York. “This soft patch is likely to be transitory as the impact of high gasoline prices and retrenchment in auto supplies fades.”

The Commerce Department’s sales figures are due at 8:30 a.m. in Washington. Economists’ estimates ranged from a decline of 1.4 percent to little change.

Also at 8:30 a.m., Labor Department figures may show the producer price index rose 0.1 percent in May after a 0.8 percent gain in April, according to the Bloomberg survey median. Core prices, which exclude volatile food and fuel, may have climbed 0.2 percent following a 0.3 percent advance.

Auto Slump

Cars and light trucks sold at an 11.8 million annual rate in May, the slowest in eight months and down from a 13.1 million pace for April, according to researcher Autodata Corp. General Motors Co. and Ford Motor Co. reported a decline in U.S. deliveries from the same month last year.

Some of the drop in demand last month reflected a shortage of Japanese-made vehicles after the earthquake and tsunami disrupted supplies. With inventories running low, companies offered smaller discounts, which also deterred buyers.

“Our biggest concern of course is that the economy has slowed a little bit from where we thought it would be,” Ford Chief Executive Officer Alan Mulally said in a June 7 Bloomberg Television interview. “Having said that, most of the economists believe that it’s going to start picking up in the second half with everything that’s been put in place, both monetarily and fiscally.”

The retail report may also show sales excluding automobiles climbed 0.2 percent last month after rising 0.6 percent in April, according to the survey median.

Retailer Shares

The Standard & Poor’s Supercomposite Retailing Index has fallen 8.1 percent since the end of April, exceeding the 6.7 percent decrease in the broader S&P 500.

The retail sales figures, which aren’t adjusted for inflation, probably reflected higher service-station receipts. Regular fuel averaged $3.90 a gallon in May, up 10 cents from April. The price reached $3.99 on May 4, the highest since July 2008, according to AAA, the nation’s biggest auto group. The cost was down to $3.70 as of June 12.

Payrolls grew by 54,000 in May, the smallest gain in eight months, and the jobless rate climbed to 9.1 percent, Labor Department figures showed on June 3. Employment at retailers fell for the second time in three months.

Less hiring was probably among the reasons at least 15 retailers fell short of estimates for sales at stores open a year or more. Limited, the Columbus, Ohio-based operator of Victoria’s Secret, reported a 6 percent gain in May same-store sales from the same month in 2010, missing the 7.4 percent average of analysts’ projections compiled by Retail Metrics.

Consumer spending will grow at an average 2.95 percent annual rate in the second half of 2011 after rising 2.1 percent this quarter, according to the median forecast of economists polled by Bloomberg News from June 1 to June 8.

--With assistance from Chris Middleton in Washington. Editors: Carlos Torres, Christopher Wellisz

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net


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