Bloomberg News

Retail Sales in U.S. Probably Climbed in October on Auto Demand

November 15, 2011

Nov. 15 (Bloomberg) -- Retail sales in the U.S. probably rose in October as demand for automobiles improved, giving the world’s largest economy a boost entering the final quarter of 2011, economists said before a report today.

The 0.3 percent gain would follow a 1.1 percent September increase, according to the median forecast of 78 economists surveyed by Bloomberg News. Wholesale prices fell and an index of New York-area manufacturing improved, other reports may show.

Consumer spending, the biggest part of the economy, needs to keep growing to bolster the expansion as the European credit crisis threatens to slow sales overseas. Nonetheless, retailers like Macy’s Inc. and Kohl’s Corp. plan to use discounts to lure shoppers during the holiday season as unemployment hovers around 9 percent and wage gains fail to keep up with inflation.

“It’s important that the consumer is growing, and contributing to the recovery,” said Conrad DeQuadros, senior economist at RDQ Economics LLC in New York. “The pickup in spending looks to have been maintained at the start of this quarter.”

The Commerce Department’s sales figures are due at 8:30 a.m. in Washington. Economists’ estimates ranged from a gain of 1.3 percent to a decline of 0.3 percent.

Also at 8:30 a.m., the Labor Department may report the producer price index fell 0.1 percent last month after advancing 0.8 percent in September, according to the survey median. Core prices, which exclude volatile food and fuel costs, may have climbed 0.1 percent from the prior month and 2.8 percent from October 2010, economists forecast.

Empire Manufacturing

A report from the Federal Reserve Bank of New York at the same time may show the so-called Empire State index, which covers New York, northern New Jersey, and southern Connecticut, rose to minus 2 in November from minus 8.5 last month, according to the Bloomberg survey median.

Improving demand for cars may lead the projected advance in sales. Auto purchases ran at a 13.2 million annual rate in October, the highest since February and up from a 13.04 million pace in September, according to data from Ward’s Information Products.

“Consumers are just saying it’s time to get a new vehicle,” Ken Czubay, Ford Motor Co.’s U.S. sales chief, said on a Nov. 1 conference call. “We’re seeing that more and more everyday from our dealers.”

Sales excluding automobiles climbed 0.2 percent in October, the smallest increase in four months, according to the Bloomberg survey median.

Retail Shares

The Standard & Poor’s Supercomposite Retailing Index has gained 7.4 percent this year through Nov. 14, while the broader S&P 500 Index dropped 0.5 percent during the same period.

Retailers are crafting incentives to lure more shoppers during the November-December holiday period. Menomonee Falls, Wisconsin-based Kohl’s, the fourth-largest U.S. department-store company, said it has stepped up marketing and promotions.

Macy’s, the second-biggest U.S. department-store chain, is seeing “the lower-income customer is struggling more than the middle- or upper-end customer,” according to Chief Financial Officer Karen Hoguet. The Cincinnati-based retailer has planned “heavy promotions” for the holiday season.

A stronger labor market is needed to speed up growth in the third year of the recovery and to cushion the U.S. from risks related to Europe’s sovereign debt crisis. Payrolls climbed by 80,000 workers in October, the smallest increase since June.

Less Saving

The jobless rate has been stuck around 9 percent or higher for more than two years. Hourly wages adjusted for inflation were down 1.8 percent in the 12 months ended in September. The savings rate for the month dropped to the lowest level since December 2007 as the lack of income forced households to put away less in reserve.

The Fed is “focusing intently on supporting job creation,” Chairman Ben S. Bernanke said on Nov. 10 in El Paso, Texas, describing unemployment as “painfully high.” While the economy is “far from where we want it to be,” he said, inflation may stay under control for the “foreseeable future.”

Also today, a 10 a.m. report from the Commerce Department may show inventories at U.S. businesses climbed 0.1 percent in September, according to the Bloomberg survey median.

--With assistance from Alex Tanzi in Washington. Editors: Carlos Torres, Gail DeGeorge

To contact the reporter on this story: Shobhana Chandra in Washington at

To contact the editor responsible for this story: Christopher Wellisz at

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