Ahead of the Bell: Retail Sales

AP News
Posted: Oct 15, 2010 7:09 AM
Ahead of the Bell: Retail Sales

Economists are looking for retail sales to rise for a third straight month in September, helped by a rebound in auto sales.

Economists at JPMorgan Chase are forecasting that retail sales increased 0.6 percent in September and excluding autos will show a 0.4 percent rise. Economists surveyed by Thomson Reuters expect an overall rise of 0.4 percent. The Commerce Department will release the new report at 8:30 a.m. EDT Friday.

In August, retail sales had risen 0.4 percent, which had been the biggest increase in five months. The gain had helped to ease fears that a late spring economic swoon could be the start of another recession.

And the August increase came despite auto sales having fallen during the month.

Economists believe the September report will show an increase in auto sales based on reports from automakers who said their sales during the month came in at an annual rate of 11.76 million units, up from a pace of 11.47 million units in August. That gain still left sales far below pre-recession level of 16 million sales in 2007.

Economists are also looking for a stronger retail sales figure in September, compared to August, because of reports from the nation's big retail establishments.

Stores including Abercrombie & Fitch Co., Limited Brands Inc. and Macy's posted strong sales figures in September, helped by customers lured to the malls by back-to-school discounting.

Analysts viewed those results as a positive sign that shoppers will be willing to spend during the upcoming holiday season.

Consumer spending is closely watched because it accounts for 70 percent of economic activity.

Even if September retail sales do come in as strong as expected, analysts cautioned not to interpret the gain as a sign the economy is getting set to take off. Instead, they said it would be more appropriate to read the figure as evidence that the recovery is continuing but at a sub-par pace.

The concern is that consumer spending will not rebound until households have the income growth to spend at a faster pace. And the income growth will not come until businesses start hiring back laid-off workers at a stronger clip.

The Labor Department reported last week that the nation's unemployment rate remained stuck at 9.6 percent in September as the country saw a net loss of 95,000 jobs.

Unemployment has been at or above 9.5 percent for a year and two months, the longest stretch since the Great Depression, a grim statistic that underscores worries about the economy as voters prepare to go to the polls on Nov. 2.

The overall economy grew at an anemic pace of just 1.7 percent, as measured by the gross domestic product, in the April-June quarter and many analysts believe GDP growth will limp along at a rate below 2 percent in the last half of this year.