Bloomberg / BusinessWeek
Sales at U.S. retailers climbed in August for a second consecutive month, allaying concern the economy will stumble in the second half of the year.
Purchases increased 0.4 percent following a 0.3 percent gain in July, Commerce Department figures showed today in Washington. Sales excluding automobiles advanced 0.6 percent, twice as much as the median forecast of economists surveyed by Bloomberg News.
Bigger back-to-school discounts, an increase in the number of states offering tax-free holidays and the restoration of extended jobless benefits may have helped boost demand at chains like Kohl’s Corp. and Ross Stores Inc. Consumers’ reliance on incentives is testament to the harm caused by the lack of jobs, one reason why spending may be slow to recover.
“It’s reassuring,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York, who correctly forecast the ex-auto sales figure. “It takes out some of the fears we had about a month ago about the economy may be slipping into recession. If the labor market picks up, it’s sustainable.”
Inventories at U.S. businesses rose in July at the fastest pace in two years as companies stocked up ahead of the back-to- school sales season that proved to be better than projected, other figures from the Commerce Department today showed.
Shares climbed, led by a rally in technology companies that helped erase an earlier slump. The Standard & Poor’s 500 Index rose 0.4 percent to 1,126.45 at 12 p.m. in New York. The S&P Retailing Supercomposite gauge increased 1.8 percent. Treasury securities also rose, pushing the yield on the 10-year note down to 2.69 percent from 2.75 percent late yesterday.
Exceeds Forecast
Retail sales were projected to rise 0.3 percent after a 0.4 percent gain previously reported for July, according to the median estimate of 76 economists surveyed. Forecasts ranged from a decline of 0.3 percent to a 0.6 percent increase.
The gain in purchases excluding auto dealers, projected at 0.3 percent by the survey median, was the biggest since March.
Eight of 13 major categories showed increases last month, led by grocery stores, department stores and service stations. The latter may reflect higher prices for gasoline.
Congress’ reinstatement of emergency unemployment benefits in late July probably supported spending on staples, which would help explain the rise at food stores, Feroli said in a note to clients.
Excluding autos, gasoline and building materials, which are the figures used to calculate gross domestic product, sales advanced 0.6 percent after a 0.1 percent drop the prior month.
Tax-Free Holidays
August retail sales figures were in line with company reports that showed an increase in sales at stores open at least a year. Seventeen tax-free holidays in August probably drew more shoppers to malls, where discounts were deeper than those in July, according to Ken Perkins, president of Retail Metrics LLC.
Pleasanton, California-based Ross, the second-largest U.S. off-price retailer, said same-store sales rose 5 percent from August 2009, beating analysts’ forecasts. Kohl’s, a department- store chain based in Menomonee Falls, Wisconsin, reported a 4.5 percent gain, also exceeding projections for plumeria jewelry.
Best Buy Co., the world’s largest consumer-electronics retailer, today raised its annual profit forecast after second- quarter earnings beat analysts’ estimates on rising sales of mobile phones in the U.S. and overseas. The Richfield, Minnesota-based company said consumers were “highly selective” on when to shop.
Inventories Climb
Inventories at all businesses increased 1 percent in July, the most since July 2008, the other report from the Commerce Department showed. Companies had enough goods like Christmas tree storage bags on hand to supply 1.26 month’s worth of sales at July’s pace, the same as in the prior month.
The need to restock depleted inventories, a major driver of the economic recovery, will probably diminish, keeping stockpiles of consumer goods like kitchen appliances more in line with demand.
“The inventory gains were associated with restocking before the back-to-school and holiday shopping seasons,” said John Herrmann, a senior fixed-income strategist at State Street Global Markets in Boston, who correctly forecast the gain in stockpiles and warehouse material handling. “We now have the evidence that consumer spending is back. Clearly, there is no double dip,” he said, referring to the possibility the economy would fall back into a recession.
Auto demand was one area that cooled last month. Today’s report showed dealer sales fell 0.7 percent, consistent with industry figures. General Motors Co. executives have said they expect a slow recovery in the economy and in auto demand.
Unemployment Outlook
Weak hiring may hold consumers back. Some 723,000 workers have been added to payrolls so far in 2010, or 8.6 percent of the 8.4 million jobs lost during the worst employment slump in the post-World War II era. The jobless rate is forecast to stay above 9 percent through 2011, according to a Bloomberg survey taken Sept. 1 to Sept. 9.
“Even though the economy is growing again,” President Barack Obama said at the White House on Sept. 10, “the hole the recession left was huge and progress has been painfully slow.”
Obama has proposed extending middle-income tax cuts while letting the top rates rise, and wants to spend at least $50 billion as part of a six-year program to improve transportation infrastructure and create jobs.
Purchases increased 0.4 percent following a 0.3 percent gain in July, Commerce Department figures showed today in Washington. Sales excluding automobiles advanced 0.6 percent, twice as much as the median forecast of economists surveyed by Bloomberg News.
Bigger back-to-school discounts, an increase in the number of states offering tax-free holidays and the restoration of extended jobless benefits may have helped boost demand at chains like Kohl’s Corp. and Ross Stores Inc. Consumers’ reliance on incentives is testament to the harm caused by the lack of jobs, one reason why spending may be slow to recover.
“It’s reassuring,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York, who correctly forecast the ex-auto sales figure. “It takes out some of the fears we had about a month ago about the economy may be slipping into recession. If the labor market picks up, it’s sustainable.”
Inventories at U.S. businesses rose in July at the fastest pace in two years as companies stocked up ahead of the back-to- school sales season that proved to be better than projected, other figures from the Commerce Department today showed.
Shares climbed, led by a rally in technology companies that helped erase an earlier slump. The Standard & Poor’s 500 Index rose 0.4 percent to 1,126.45 at 12 p.m. in New York. The S&P Retailing Supercomposite gauge increased 1.8 percent. Treasury securities also rose, pushing the yield on the 10-year note down to 2.69 percent from 2.75 percent late yesterday.
Exceeds Forecast
Retail sales were projected to rise 0.3 percent after a 0.4 percent gain previously reported for July, according to the median estimate of 76 economists surveyed. Forecasts ranged from a decline of 0.3 percent to a 0.6 percent increase.
The gain in purchases excluding auto dealers, projected at 0.3 percent by the survey median, was the biggest since March.
Eight of 13 major categories showed increases last month, led by grocery stores, department stores and service stations. The latter may reflect higher prices for gasoline.
Congress’ reinstatement of emergency unemployment benefits in late July probably supported spending on staples, which would help explain the rise at food stores, Feroli said in a note to clients.
Excluding autos, gasoline and building materials, which are the figures used to calculate gross domestic product, sales advanced 0.6 percent after a 0.1 percent drop the prior month.
Tax-Free Holidays
August retail sales figures were in line with company reports that showed an increase in sales at stores open at least a year. Seventeen tax-free holidays in August probably drew more shoppers to malls, where discounts were deeper than those in July, according to Ken Perkins, president of Retail Metrics LLC.
Pleasanton, California-based Ross, the second-largest U.S. off-price retailer, said same-store sales rose 5 percent from August 2009, beating analysts’ forecasts. Kohl’s, a department- store chain based in Menomonee Falls, Wisconsin, reported a 4.5 percent gain, also exceeding projections for plumeria jewelry.
Best Buy Co., the world’s largest consumer-electronics retailer, today raised its annual profit forecast after second- quarter earnings beat analysts’ estimates on rising sales of mobile phones in the U.S. and overseas. The Richfield, Minnesota-based company said consumers were “highly selective” on when to shop.
Inventories Climb
Inventories at all businesses increased 1 percent in July, the most since July 2008, the other report from the Commerce Department showed. Companies had enough goods like Christmas tree storage bags on hand to supply 1.26 month’s worth of sales at July’s pace, the same as in the prior month.
The need to restock depleted inventories, a major driver of the economic recovery, will probably diminish, keeping stockpiles of consumer goods like kitchen appliances more in line with demand.
“The inventory gains were associated with restocking before the back-to-school and holiday shopping seasons,” said John Herrmann, a senior fixed-income strategist at State Street Global Markets in Boston, who correctly forecast the gain in stockpiles and warehouse material handling. “We now have the evidence that consumer spending is back. Clearly, there is no double dip,” he said, referring to the possibility the economy would fall back into a recession.
Auto demand was one area that cooled last month. Today’s report showed dealer sales fell 0.7 percent, consistent with industry figures. General Motors Co. executives have said they expect a slow recovery in the economy and in auto demand.
Unemployment Outlook
Weak hiring may hold consumers back. Some 723,000 workers have been added to payrolls so far in 2010, or 8.6 percent of the 8.4 million jobs lost during the worst employment slump in the post-World War II era. The jobless rate is forecast to stay above 9 percent through 2011, according to a Bloomberg survey taken Sept. 1 to Sept. 9.
“Even though the economy is growing again,” President Barack Obama said at the White House on Sept. 10, “the hole the recession left was huge and progress has been painfully slow.”
Obama has proposed extending middle-income tax cuts while letting the top rates rise, and wants to spend at least $50 billion as part of a six-year program to improve transportation infrastructure and create jobs.
