Ahead of the bell: retail sales

[August 13, 2009]  WASHINGTON (AP) -- Retail sales likely rose again in July, boosted by the government's popular Cash for Clunkers program.

Economists surveyed by Thomson Reuters expect retail sales rose 0.7 percent last month after a 0.6 percent increase in June.

However, economists do not believe consumer spending will look as strong excluding auto sales. The Thomson Reuters consensus view is that retail sales, excluding autos, will show a modest 0.1 percent increase, weaker than the 0.3 percent gain in June.

Economists at IHS Global Insight expect modest gains in many areas outside of autos to be offset by a big drop in sales at gasoline stations due to falling prices at the pump. The retail sales figures are not adjusted for price changes.

Reports last week from the nation's major chain stores indicated that shoppers remained tightfisted in July as households struggle with continued job layoffs and the nation's longest recession since World War II.

A big concern now is whether worried consumers will cut back on their back-to-school in coming weeks and their holiday shopping later this year.

Offsetting the weakness at many retail stores will be an additional $2 billion funding from Congress for the Cash for Clunkers program, which gives people trading in certain types of vehicles up to $4,500 if they increase their mileage by at least 5-10 mpg. The program was created to provide help to the beleaguered auto industry and the environment.

The program has proven popular, helping to boost unit sales of light vehicles in July to the highest level since last September.

Economists hope that such programs and the government's other economic stimulus efforts will help bolster the consumer sector and bring and end to a recession that began in December 2007.

Many economists expect the recession will end in the current July-September period although they caution that the recovery is likely to be anemic given all the problems still facing the economy. They forecast that the unemployment rate, which dipped to 9.4 percent in July, will top 10 percent early next year.

The Federal Reserve, concluding its first meeting since the economy flashed more definitive signs of turning a corner, kept a key interest rate near a record low where it has been since last December and pledged to hold rates at low levels for "an extended period."

[Associated Press]

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