U.S. retail sales increase for second straight month

September 14, 2010
cash register

Sales at U.S. retailers rose in August for a second consecutive month, easing some concern the economy will continue to stumble in the second half of the year.

Purchases increased 0.4 percent following a 0.3-percent gain in July that was smaller than previously estimated, Commerce Department figures showed Tuesday. Sales excluding automobiles advanced twice as much as predicted.

Demand at chains like Kohl’s Corp. and Ross Stores Inc. climbed as more states had tax-free holidays and some merchants offered bigger discounts to lure back-to-school shoppers. A lack of jobs and the need to repair household finances will probably restrain consumer spending, which accounts for about 70 percent of the economy, for the rest of the year.

“It’s reassuring,” said Michael Feroli, chief U.S. economist at JPMorgan Chase in New York, who correctly forecast the increase. “It takes out some of the fears we had about a month ago about the economy maybe slipping into recession. If the labor market picks up, it’s sustainable.”

Retail sales were projected to rise 0.3 percent, according to the median estimate of 76 economists in a Bloomberg News survey. Forecasts ranged from a decline of 0.3 percent to a 0.6-percent increase.

Excluding auto dealers, purchases climbed 0.6 percent, the most since March. They were projected to increase 0.3 percent, according to the survey median.

Eight of 13 major categories showed increases last month, led by grocery stores and service stations. The latter may reflect higher prices for gasoline.

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.

Spending increased 1.2 percent at clothing stores and 0.4 percent at general merchandise stores.

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, Calif.-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, Wisc., reported a 4.5-percent gain, also exceeding projections.

Some merchants are more cautious. Talbots Inc., the clothing retailer, last week cut its annual revenue forecast. Same-store sales fell 1.4 percent in the second quarter ended July 31, the Hingham, Mass.-based company said.

“Like many retailers, we will continue to look cautiously at the second half of 2010,” CEO Trudy Sullivan said on a conference call on Sept. 8. “The economic recovery has certainly experienced stalls and starts in the last several months and there is no indication that volatility is over.”

Tuesday's report showed sales fell 0.7 percent at automobile dealers, consistent with industry figures that showed a slowdown. Toyota Motor Corp., General Motors Co. and Ford Motor Co., the three largest sellers of autos in the U.S., had bigger declines in sales compared with August 2009 than analysts forecast. GM executives expect a slow recovery in the economy and in auto demand.

“We know it’s going to continue to be bumpy,” Don Johnson, GM vice president of U.S. sales operations, said on a Sept. 1 conference call. “We’re not panicking.”

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.


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