Retail Sales Probably Rose on Tax Rebates: U.S. Economy Preview

By Shobhana Chandra

July 13 (Bloomberg) -- Sales at U.S. retailers probably increased in June as Americans spent tax-rebate checks and record gasoline prices boosted receipts at service stations, economists said before reports this week.

Purchases rose 0.4 percent after a 1 percent gain the prior month, according to the median estimate in a Bloomberg News survey ahead of a Commerce Department report on July 15. Rising fuel and food costs also pushed up a cost-of-living index and a wholesale price gauge in June, other figures may show.

Consumers used the extra cash from the government's stimulus plan to buy discounted groceries and gasoline, lifting sales at stores including Wal-Mart Stores Inc. and Costco Wholesale Corp. The gains may dissipate after the checks are spent and households have to face plunging home values, less credit and costlier fuel.

``The stimulus checks are providing a fairly potent environment for retail sales,'' said Joseph Brusuelas, chief economist at Merk Investments LLC in Palo Alto, California. ``That is masking the real condition of the consumer, who is flat on his or her back. Once the impact of the stimulus fades, we're going to have a massive payback.''

Retail sales excluding automobiles probably rose 0.9 percent last month, the median forecast in the Bloomberg survey shows. The figure will include more spending at gasoline service-stations.

Regular unleaded fuel prices topped $4 a gallon in June and touched a record $4.11 last week, according to AAA.

Inflation Signs

Rising energy costs raise the risk of a broader pickup in inflation. The consumer price index rose 0.7 percent in June, the most since November, according to the Bloomberg survey median. Excluding food and energy, prices likely rose 0.2 percent for a second month. The Labor Department's report is due on July 16.

On July 15, another report from Labor may show prices paid to producers climbed for a sixth month in June, reflecting surging fuel and food expenses.

The threat of accelerating inflation is one reason Federal Reserve policy makers may forgo raising interest rates this year, even as the economy looks likely to stall following the temporary boost from the stimulus plan.

Economic growth will slow to a 0.5 percent annual rate in the fourth quarter, the weakest pace in six years, according to the median forecast in a monthly Bloomberg survey. Fourth- quarter consumer spending will post the smallest gain since 1991, the survey showed.

Consumers are holding back on big-ticket purchases such as automobiles. Cars and light trucks sold at a 13.6 million annual pace last month, the fewest since 1998, industry data showed.

Rebate Checks

The government had distributed $86.1 billion in rebate checks through July 4, out of a total plan of about $110 billion. Rebate-linked promotions helped sales at stores open at least a year to rise a better-than-forecast 4.3 percent in June, according to the International Council of Shopping Centers.

Wal-Mart's same-store sales jumped 5.8 percent in June, the biggest gain in four years. The Bentonville, Arkansas-based company's U.S. discount stores and Sam's Club membership warehouses drew additional consumers who spent more on the average visit in June than in prior months.

``We continue to see a shift in the overall mix toward fuel, food and consumables, as our members manage through the current environment,'' Doug McMillon, Sam's Club president and chief executive officer, said in a statement on July 10.

Two reports will reflect the prolonged housing slump. Commerce Department figures to be released July 17 may show that builders broke ground in June on the fewest homes in 17 years, according to the Bloomberg survey. The National Association of Home Builders/Wells Fargo sentiment index, scheduled for release July 16, may show builder confidence was at a record low for the second month in July, according to the survey median.

                         Bloomberg Survey
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                       Release    Period    Prior     Median
Indicator                 Date               Value    Forecast
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PPI  MOM%                 7/15      June      1.4%      1.3%
Core PPI MOM%             7/15      June      0.2%      0.3%
PPI  YOY%                 7/15      June      7.2%      8.6%
Core PPI YOY%             7/15      June      3.0%      3.2%
Empire Manu. Index        7/15      July      -8.7      -7.8
Retail Sales MOM%         7/15      June      1.0%      0.4%
Retail ex-autos MOM%      7/15      June      1.2%      1.0%
Business Inv. MOM%        7/15      May       0.5%      0.5%
IBD/TIPP Conf. Index      7/15      Dec.      37.4      36.8
ABC Conf Index            7/15     14-Jul     -41       -42
Mortgage Apps. WOW%       7/16     12-Jul     7.5%      n/a
CPI  MOM%                 7/16      June      0.6%      0.7%
Core CPI MOM%             7/16      June      0.2%      0.2%
CPI  YOY%                 7/16      June      4.2%      4.5%
Core CPI YOY%             7/16      June      2.3%      2.3%
Core CPI SA Index         7/16      June    214.832     n/a
CPI NSA Index             7/16      June    216.632   217.907
Net Long Term TICS $ Bl   7/16      May      115.1      67.5
Total TICS $ Blns         7/16      May       60.6      57.5
Ind. Prod. MOM%           7/16      June     -0.2%      0.0%
Cap. Util. %              7/16      June     79.4%     79.4%
NAHB Housing Index        7/16      July       18        18
Housing Starts ,000's     7/17      June      975       960
Building Permits ,000's   7/17      June      978       965
Initial Claims ,000's     7/17     13-Jul     346       380
Cont. Claims ,000's       7/17     6-Jul      3202      3180
Philly Fed Index          7/17      July     -17.1     -15.0
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To contact the reporter on this story:
[bn:PRSN=1] Shobhana Chandra [] in Washington at
schandra1@bloomberg.net