Retail sales probably stagnated in March as scant progress in the labor market made it difficult for Americans to boost spending, economists said before a report this week.
Purchases were unchanged last month after a 1.1 percent increase in February that was the biggest gain in five months, according to the median projection from 64 economists surveyed by Bloomberg before Commerce Department data on April 12.
A March slowdown in hiring combined with little growth in wages may make it difficult for household spending, which account for about 70 percent of the economy, to extend gains seen at the end of 2012 and the first two months of this year. Nonetheless, Americans are finding relief in falling gasoline prices and cheaper borrowing costs, which will prevent a slump.
“I worry a little bit about the economy going into the second quarter, but I don’t think all is weak,” said Raymond Stone, managing director of Stone & McCarthy Research Associates in Princeton, New Jersey, and the second-best forecaster of retail sales in the past two years, according to data compiled by Bloomberg. “Automobiles, housing sales are doing better, lenders are beginning to ease standards, so I think there’s reason to believe that healing will continue.”
Consumer spending probably grew at a 3.3 percent annualized rate from January through March, marking its strongest performance in two years, according to a forecast by economists at JPMorgan Chase & Co. in New York. Household purchases advanced at a 1.8 percent rate from October to December, figures from the Commerce Department show.
The pickup may not last as purchases are projected to expand at a 1 percent pace this quarter, according to JPMorgan Chase.
Pickups in consumer and business spending probably helped the economy expand at a 4 percent annual rate in the first quarter, according to the JPMorgan Chase economists. They project growth will cool to a 1.5 percent pace this quarter.
Sales picked up in February even as higher taxes took more out of Americans’ pocketbooks. Congress agreed to a fiscal pact on Jan. 1 that gave a permanent tax break to 99 percent of citizens while allowing the levy used to finance Social Security revert to 6.2 percent from 4.2 percent. A worker earning $50,000 a year is taking home about $83 less a month because of the higher tax.
Gas prices fell in March, a month when they typically rise, freeing up more cash for consumers to spend on other goods and services, and income tax returns have started to come in from the Internal Revenue Service.
Still, signs of a cooling in the labor market may temper spending. Payrolls grew by 88,000 last month, the smallest gain since June. Employees’ average hourly earnings were unchanged in March from the prior month, the weakest showing since October, the Labor Department’s April 5 data also showed.
Stocks and Treasury yields declined after the report. The Standard & Poor’s 500 Index decreased 0.4 percent, while the yield on the benchmark 10-year note dropped five basis points, or 0.05 percentage point, to 1.71 percent.
“There’s a large group of consumers who are more financially constrained than they would like and can’t go out as often,” Andrew Madsen, chief operating officer of Darden Restaurants Inc. (DRI:US), said during an April 4 investor conference.
Officials at the Federal Reserve want to see the economy quicken so that more of the 11.7 million unemployed Americans find jobs. Further insight into how the central bankers view the expansion and their asset purchase program will be unveiled April 10, when minutes from the Federal Open Market Committee’s March meeting are released.
Another report on April 12 is forecast to show sustained consumer optimism. The Thomson Reuters/University of Michigan gauge of sentiment probably rose to 78.8 in April from 78.6 the prior month.
Bloomberg Survey =============================================================== Release Period Prior Median Indicator Date Value Forecast =============================================================== NFIB Optimism Index 4/9 March 90.8 90.5 Whlsale Inv. MOM% 4/9 Feb. 1.2% 0.5% Whlsale Sales MOM% 4/9 Feb. -0.8% 1.5% JOLTs Job Openings 4/9 Feb. 3693 3730 Federal Budget $ Blns 4/10 March -198.2 -108.5 Import Prices MOM% 4/11 March 1.1% -0.5% Import Prices YOY% 4/11 March -0.3% -1.9% Initial Claims ,000’s 4/11 6-Apr 385 360 Cont. Claims ,000’s 4/11 30-Mar 3063 3073 Retail Sales MOM% 4/12 March 1.1% 0.0% Retail ex-autos MOM% 4/12 March 1.0% 0.1% Retail ex-auto/gas MOM% 4/12 March 0.4% 0.3% Retail control MOM% 4/12 March 0.4% 0.2% PPI MOM% 4/12 March 0.7% -0.2% Core PPI MOM% 4/12 March 0.2% 0.2% PPI YOY% 4/12 March 1.7% 1.4% Core PPI YOY% 4/12 March 1.7% 1.7% U of Mich Conf. Index 4/12 April P 78.6 78.8 Business Inv. MOM% 4/12 Feb. 1.0% 0.4% ===============================================================
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