Bloomberg News

Retail Sales in U.S. Probably Stagnated as Auto Demand Cooled

July 14, 2011

July 14 (Bloomberg) -- Sales at U.S. retailers probably stagnated in June, reflecting declining auto demand and rising unemployment, economists said before a report today.

The projected 0.1 percent drop in purchases would follow a 0.2 percent May decrease, according to the median forecast of 79 economists surveyed by Bloomberg News. Another report may show wholesale prices fell last month.

Supply constraints due to Japan’s earthquake helped push car sales last month to the lowest level since June 2010, while unemployment prompted stores like Target Corp. and Gap Inc. to sweeten discounts to lure customers. A dearth of jobs raises the risk that consumer spending, which makes up 70 percent of the economy, will have difficulty picking up for the rest of 2011.

“Improvements in retail sales will remain elusive if job growth does not re-accelerate,” said Russell Price, a senior economist at Ameriprise Financial Services Inc. in Detroit. “Consumers still face a very tough environment.”

The Commerce Department’s sales figures are due at 8:30 a.m. in Washington. Estimates in the Bloomberg survey ranged from a decline of 0.7 percent to a gain of 0.5 percent.

The retail report may also show sales excluding automobiles were unchanged last month after increasing 0.3 percent in May, economists said.

The figures, which aren’t adjusted for inflation, probably were depressed by receipts at service stations that reflected lower gasoline costs. Regular fuel averaged $3.67 a gallon in June, down from $3.90 the prior month, according to AAA, the nation’s biggest auto club.

Discounting Inventory

Discounts implemented to clear inventory ahead of the back- to-school season helped June sales at chain stores beat analysts’ estimates. Target, the second-largest U.S. discount retailer, posted a 4.5 percent increase from a year earlier, while demand at Gap rose 1 percent, beating projections for a drop, the stores reported last week.

The Standard & Poor’s Supercomposite Retailing Index has risen 1 percent from the end of April. The broader S&P 500 Index declined 3.4 percent during the same period as the European debt crisis and a U.S. debt-ceiling impasse concerned investors.

Payrolls grew by 18,000 workers last month, the smallest gain since September, the Labor Department reported July 8. The jobless rate climbed for a third straight month, rising to 9.2 percent, the highest level this year.

Auto Sales

Sales of cars and light vehicle ran at a seasonally adjusted 11.41 million annual rate in June, down from 11.76 million in May and 13.14 million in April, according to researcher Autodata Corp. Toyota Motor Corp. and Honda Motor Co. deliveries each fell 21 percent from the same month last year, reflecting supply-chain constraints linked to Japan’s March earthquake, while General Motors Co. and Ford Motor Co. said sales rose 10 percent.

“We have to recognize that the Japan crisis in and of itself was contributing to the slowdown, and that’s starting to be behind us,” said GM’s Vice President for U.S. sales Donald Johnson on a July 1 teleconference. “While we’ve had these couple of bumps, we believe that the recovery will be back on track.”

Federal Reserve Chairman Ben S. Bernanke told Congress yesterday the central bank is prepared to take additional action, including buying more government bonds, should the economy be in danger of stalling.

“The possibility remains that the recent economic weakness may prove more persistent than expected and that deflationary risks might reemerge, implying a need for additional policy support,” Bernanke said in prepared testimony before the House Financial Services Committee in Washington.

Prices Fall

The producer-price index fell 0.2 percent in June after a 0.2 percent gain in May, reflecting the drop in fuel costs, economists projected a Labor Department report will show at 8:30 a.m. Core prices, which exclude volatile food and fuel, may have climbed 0.2 percent from a month earlier.

A separate report at the same time will show the number of workers filing claims for jobless benefits last week dropped to 415,000 from 418,000 the prior period, according to the median forecast of economists surveyed by Bloomberg.

--Editors: Carlos Torres, Vince Golle

To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

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


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