U.S. retail sales fail to reach forecast
By Joe Richter
Bloomberg News Service
U.S. retail sales rose less than forecast in August and consumer confidence waned this month, raising investor concern that consumers may not be able to maintain their spending.
Retailers' sales increased 0.6 percent, less than the 1.5 percent forecast and below the 1.3 percent posted in July, as auto dealers offered rebates and building-material purchases fell for the first time since February, the Commerce Department said in Washington.
"Households are really spreading the wealth around," said Joel Naroff, president of Naroff Economic Advisors in Holland, Pa. "But don't count on the consumer to continue to spend with abandon. Job growth remains nonexistent and the refinance funds source is disappearing."
Economists including Naroff said the August sales statistics, while below median forecasts, may help third-quarter economic growth.
The increase followed the gain in July and was the fourth rise in a row, the first time that has happened since 1999. Without autos, sales rose 0.7 percent after a July increase that was stronger than previously estimated.
"While this report is weaker than expectations, it is not a weak retail sales report," said John Ryding, chief market economist of Bear, Stearns & Co.
"Every major category of sales posted an increase, other than building materials and apparel. There is nothing in here to lead us to believe that we should be lowering our GDP growth estimate of 5 percent for the third quarter," he said.
The retail report showed sales at automobile dealerships and parts stores rose 0.5 percent in August after jumping 2.4 percent a month earlier. Cars and light trucks sold at a 19 million-vehicle annual rate last month, the highest since 21.3 million in October 2001.
After the report, Henry Willmore, chief U.S. economist at Barclays Capital Inc. in New York, raised his forecast for third-quarter spending.
Consumer spending represents two-thirds of the economy.
Extra cash from the federal tax cuts and mortgage refinancing is making purchases easier, but higher fuel prices and a lack of jobs are eroding optimism.
The University of Michigan's index of consumer sentiment unexpectedly fell to 88.2 this month from 89.3. It was the third decline in four months.
Confidence is faltering because the economy isn't creating jobs, economists said. Almost 600,000 U.S. workers lost jobs over the past seven months. Higher gasoline prices also soured consumers' outlook.
