Sunday, March 8, 2009

Retail Sales Probably Fell in February: U.S. Economy Preview

By Shobhana Chandra

March 8 (Bloomberg) -- Sales at U.S. retailers probably fell in February for the seventh time in eight months as soaring unemployment battered consumers, economists said before a government report this week.

Purchases dropped 0.5 percent, according to the median estimate in a Bloomberg News survey ahead of Commerce Department figures due on March 12. Another report may show the trade gap shrank in January as Americans bought fewer goods made abroad.

Consumers are shopping at discounters like Wal-Mart Stores Inc. to make ends meet as home values plunge and the jobless rate climbs, forsaking purchases of expensive items like automobiles. President Barack Obama, trying to maintain support for his $787 billion stimulus plan, last week said the deteriorating economy demands “bold action and big ideas.”

“The headwinds are coming from everywhere,” said Jonathan Basile, an economist at Credit Suisse Holdings in New York. “Persistent job losses and reports of pay cuts have become embedded in consumer expectations and they think that incomes are going to shrink.”

A Labor Department report last week showed employers eliminated 651,000 jobs in February and the unemployment rate jumped to 8.1 percent, the highest level since December 1983. Job losses have now exceeded 600,000 for three straight months, the first time that’s happened since records began in 1939.

While Obama’s stimulus plan aims to create or save 3.5 million jobs, the nation has now already lost 4.4 million since the recession began in December 2007.

Wal-Mart Gains

Lower home values and stricter lending rules have made consumers reluctant to spend beyond necessities. Wal-Mart, the world’s largest retailer, last week said sales at stores open at least a year rose 5.1 percent in February as cash-strapped shoppers sought cheaper gasoline and groceries.

“It’s almost like a significant percentage of consumers realize that they might have been living beyond their real means,” Eduardo Castro-Wright, Bentonville, Arkansas-based Wal- Mart’s head of U.S. stores, said in a Feb. 26 interview.

Others didn’t fare as well. Retailers from Macy’s Inc., the second-biggest U.S. department-store company, to Gap Inc., the largest U.S. apparel chain, and luxury seller Saks Inc. reported declines.

Retailers’ March same-store sales may drop as much as 1 percent, according to Mike Niemira, chief economist at the New York-based International Council of Shopping Centers.

Fewer Autos

Commerce’s report may also show that excluding automobiles, sales declined 0.1 percent last month, the survey showed. Total sales rose 1 percent in January.

Auto dealers are struggling. Sales in February fell to the lowest level since 1981, industry data showed last week. General Motors Corp., surviving with the help of government loans, said sales plunged 53 percent, while Ford Motor Co. had a 48 percent decline.

“This is still a deepening recession and a deepening credit crunch,” Treasury Secretary Timothy Geithner said at a Senate hearing last week.

The ailing economy is weighing on Americans’ confidence. A March 13 report by Reuters/University of Michigan may show its consumer sentiment index fell this month to the lowest level since 1980, according to the survey median.

As demand cools, imports also are falling. The trade deficit probably narrowed in January to $38 billion, the smallest in more than six years, the survey showed. Exports also will keep sliding in the face of economic slumps from Europe to Japan. Commerce will report the figures on March 13.

The same day, a Labor report may show the cost of imported goods fell in February for the seventh consecutive month as waning sales eroded companies’ pricing power, economists said.

Bloomberg Survey

Release Period Prior Median
Indicator Date Value Forecast
Whlsale Inv. MOM% 3/10 Jan. -1.4% -1.0%
Federal Budget $ Blns 3/11 Feb. -195.6 -205.0
Retail Sales MOM% 3/12 Feb. 1.0% -0.5%
Retail ex-autos MOM% 3/12 Feb. 0.9% -0.1%
Initial Claims ,000’s 3/12 Mar 639 642
Cont. Claims ,000’s 3/12 Feb. 28 5106 5150
Business Inv. MOM% 3/12 Jan. -1.3% -1.1%
Trade Balance $ Blns 3/13 Jan. -39.9 -38.0
Import Prices MOM% 3/13 Feb. -1.1% -0.7%
Import Prices YOY% 3/13 Feb. -12.5% -13.6%
U of Mich Conf. Index 3/13 March P 56.3 55.0

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