U.S. Retail Sales Probably Slowed in October as Fuel Costs Rose

By Courtney Schlisserman


Nov. 14 (Bloomberg) -- Retail sales in the U.S. probably increased at a slower pace in October as rising fuel prices and falling property values left shoppers with little extra cash to spend, economists said before a government report today.

Purchases rose 0.1 percent, the smallest increase in four months, after climbing 0.6 percent in September, according to the median estimate in a Bloomberg News survey. Another report may show higher energy costs pushed up wholesale prices.

Americans skimped on clothing and furniture to pay their energy bills, adding to concern a slowdown in consumer spending will weaken economic growth. Federal Reserve policy makers have signaled a reluctance to lower interest rates again as the jump in fuel expenses poses risks for both the expansion and prices.

``A slow holiday shopping season will mark the beginning of an extended consumption slowdown,'' said Drew Matus, a senior economist at Lehman Brothers Holdings Inc. in New York. ``Perhaps the biggest concern is the rise in energy prices.''

The Commerce Department will issue the retail sales report at 8:30 a.m. in Washington. The 76 forecasts in the Bloomberg survey ranged from a decline of 0.4 percent to a gain of 0.5 percent. Retail sales make up almost half of all consumer spending, which in turn accounts for more than two-thirds of the economy.

The report is also forecast to show purchases excluding automobiles rose 0.2 percent after a 0.4 percent September gain, according to the survey median.

Producer Prices

Also at 8:30 a.m., the Labor Department may report prices paid to producers rose 0.3 percent in October after a 1.1 percent jump the prior month, according to the Bloomberg survey median. Core costs, which exclude food and energy, probably rose 0.2 percent following a 0.1 percent gain. Rising wholesale prices give businesses more reason to pass increases on to customers.

The Fed currently views the risks of higher inflation and slower growth as equally balanced after it lowered the rate target twice in as many months, Chairman Ben S. Bernanke said Nov. 8 in testimony to Congress.

``Further sharp increases in crude oil prices have put renewed upward pressure on inflation and may impose further restraint on economic activity,'' Bernanke said.

The economy will grow at an annual rate of 1.5 percent from October through December, less than half the pace of the previous three months, according to the median forecast in a Bloomberg survey from Nov. 1 to Nov. 8. Consumer spending will rise at a 2 percent rate, also slower than the third quarter, the survey showed.

Mounting Headwinds

Gasoline at more than $3 a gallon, declines in home values and restrictions on borrowing will limit Americans' ability to spend as the November-December holiday shopping season gets under way, economists said.

Unseasonably warm weather made matters worse for merchants last month as demand for jackets and sweaters waned. Seven out of 10 retailers, including Wal-Mart Stores Inc. and Macy's Inc., reported October sales below analysts' forecasts, according to a report last week from Retail Metrics LLC.

Sales at chain stores increased 1.6 percent from the same month last year, the worst October since 1995, the International Council of Shopping Centers said last week. The results, based on 44 retailers, missed the New York-based group's 2 percent forecast and suggest a slowdown in holiday spending.

Wal-Mart marked down 15,000 holiday items, 20 percent more than last year, and started discounting toys in the beginning of October, more than two weeks earlier than in 2006. The world's largest retailer yesterday reported an increase in third-quarter profit, helped by the price-cutting strategy.

The housing slump will linger well into 2008, continuing to decrease demand for furniture, appliances and home-related goods, economists said. Home Depot Inc., the world's largest home-improvement retailer, yesterday reported lower third- quarter profit and cut its full-year earnings forecast.

``We are facing a tough environment as housing indicators continue to deteriorate,'' Chief Executive Officer Frank Blake said in a statement.

Bloomberg Survey

FIRM PPI PPI Retail Retail
Core Sales ex autos
-------------------------------------------------------------
Number of replies 75 73 76 69
MEDIAN 0.3% 0.2% 0.1% 0.2%
AVERAGE 0.4% 0.2% 0.1% 0.2%
High Forecast 1.3% 0.3% 0.5% 0.6%
Low Forecast -0.3% -0.3% -0.4% -0.4%
Previous 1.1% 0.1% 0.6% 0.4%
-------------------------------------------------------------
4CAST Ltd. 0.6% 0.2% 0.0% 0.1%
Action Economics 0.3% 0.1% 0.2% 0.3%
Alleti Gestielle SGR 0.5% 0.1% 0.1% 0.3%
Allianz Dresdner n/a n/a 0.2% n/a
Argus Research 0.4% 0.2% 0.5% 0.4%
BBVA 0.2% n/a n/a n/a
BMO Capital Markets 0.5% 0.2% 0.3% 0.4%
BNP Paribas 0.5% 0.1% -0.1% 0.1%
B of A Securities 0.6% 0.2% 0.2% 0.3%
Bantleon Bank AG 0.3% n/a 0.1% 0.2%
Barclays Capital 0.2% 0.2% 0.2% 0.4%
Bear Stearns 0.6% 0.3% 0.0% 0.2%
BOT- Mitsubishi 0.2% 0.2% 0.3% 0.3%
Briefing.com 0.1% 0.1% 0.0% 0.2%
Calyon 0.3% 0.2% 0.3% 0.4%
CFC Group 0.4% 0.3% 0.1% 0.5%
CIBC World Markets 0.3% 0.2% 0.2% 0.1%
Citigroup 0.1% 0.0% 0.2% 0.3%
ClearView Economics 0.5% 0.2% 0.2% 0.4%
Commerzbank 0.4% 0.2% 0.3% 0.3%
Credit Suisse 0.2% 0.3% 0.0% 0.1%
Daiwa Securities 0.3% 0.2% 0.2% 0.2%
Danske Bank 0.5% 0.2% 0.2% 0.4%
DekaBank 0.3% 0.0% -0.1% 0.1%
Desjardins Group 0.0% 0.1% 0.0% 0.2%
Deutsche Bank 0.5% 0.1% 0.1% 0.2%
Deutsche PostBank 0.3% 0.2% 0.2% 0.3%
Dresdner Kleinwort 0.3% 0.1% 0.4% 0.5%
DZ Bank 0.3% 0.2% 0.0% 0.1%
First Trust Advisors 0.3% 0.2% 0.3% 0.6%
Fortis 0.3% 0.2% 0.4% n/a
Global Insight 0.2% 0.2% 0.1% 0.2%
Goldman Sachs 0.1% 0.2% 0.0% 0.2%
H&R Block Financial 0.5% 0.1% 0.2% 0.3%
High Frequency 0.4% 0.2% 0.2% 0.1%
HBOS Treasury 0.2% 0.3% 0.0% 0.0%
HSH Nordbank AG 0.4% 0.3% 0.0% 0.2%
Horizon Investments 0.5% 0.2% 0.2% 0.3%
IDEAglobal 0.2% 0.2% 0.2% 0.3%
ING Barings 0.3% 0.2% 0.2% 0.3%
Informa Global 0.4% 0.2% -0.1% 0.3%
Insight Economics 0.6% 0.2% 0.1% 0.3%
Intesa-SanPaulo 0.4% 0.2% 0.2% 0.3%
J.P. Morgan Chase 0.1% 0.0% 0.0% 0.2%
JPMorgan Private 0.1% 0.2% 0.2% 0.1%
Janney Montgomery n/a 0.2% 0.0% n/a
Landesbank BW 0.4% n/a 0.2% n/a
Landesbank Berlin 0.2% 0.1% -0.4% -0.4%
Lehman 0.1% 0.2% 0.2% 0.2%
Lloyds TSB 0.3% 0.2% 0.2% 0.3%
Maria Fiorini 0.3% 0.2% 0.1% 0.2%
Merrill Lynch 1.0% 0.1% 0.0% 0.1%
MFC Global Invest. 0.4% 0.2% 0.3% 0.5%
Mizuho Securities 0.5% 0.2% 0.4% 0.5%
Moody's Economy.com 0.8% 0.2% 0.0% 0.1%
Morgan Stanley -0.3% -0.3% 0.0% 0.2%
National Bank Fin. 0.4% 0.2% 0.2% 0.3%
National City Bank -0.1% 0.1% 0.0% 0.2%
Natixis 1.3% 0.2% -0.1% n/a
Nomura 0.2% 0.2% 0.1% 0.2%
Nord/LB 1.0% 0.1% 0.0% 0.2%
PNC Bank 0.3% 0.2% 0.1% 0.2%
RBS Greenwich Cap. -0.2% 0.0% 0.1% 0.0%
Ried, Thunberg 0.2% 0.2% 0.0% 0.4%
Scotia Capital 0.3% 0.2% 0.0% 0.1%
Societe Generale 0.0% 0.2% 0.3% 0.4%
State Street 0.2% 0.1% 0.3% 0.3%
Stone & McCarthy 0.5% 0.1% 0.1% 0.3%
TD Securities n/a n/a 0.0% 0.2%
Thomson/IFR 1.3% 0.1% 0.4% 0.4%
UBS Securities LLC 0.2% 0.2% n/a n/a
Unicredit- UBM 0.3% 0.2% 0.0% n/a
Univ. of MD 0.2% 0.1% 0.3% 0.5%
Wachovia 0.6% 0.3% 0.0% 0.1%
Wells Fargo 0.0% 0.1% 0.3% n/a
WestLB AG 0.6% 0.2% 0.2% 0.3%
Westpac Banking 0.5% 0.2% 0.0% 0.1%
Wrightson 0.3% 0.1% -0.1% 0.2%