U.S. August Retail Sales Fall 2.1%; Ex-Autos Rise 1%
U.S. August Retail Sales Fall 2.1%; Ex-Autos Rise 1%
Sept. 14 (Bloomberg) -- U.S. retail sales fell in August by the most since November 2001 as auto purchases slumped after a buoyant July.
The 2.1 percent decline follows a 1.8 percent increase the month before that was the same as originally reported, the Commerce Department said today in Washington. Excluding autos, sales rose 1 percent, twice as much as expected. Also subtracting purchases at service stations, sales rose 0.5 percent.
Auto purchases dropped last month as the lure of employee discounts faded. Sales at chain stores including Wal-Mart Stores Inc. were also weaker as surging gasoline prices prevented consumers from spending on other goods. Higher fuel costs and job losses after Hurricane Katrina threaten to further undermine spending in coming months, economists said.
``People are spending more on gasoline and less on other things,'' Kevin Logan, senior market economist at Dresdner Kleinwort Wasserstein in New York, said before the report. ``This will be compounded for the month of September.''
Economists surveyed by Bloomberg News expected retail sales to fall 1.4 percent, the median estimate of 61 forecasts, from the originally reported 1.8 percent increase for July. Excluding autos, sales were projected to rise 0.5 percent.
Retail sales account for almost half of all consumer spending, which in turn accounts for about two-thirds of the economy. Economists including those at Lehman Brothers Inc. and Goldman Sachs Group Inc. lowered their forecasts for consumer spending and economic growth for the rest of the year after Hurricane Katrina hit the Gulf Coast on Aug. 29.
Autos
Sales at automobile dealerships and parts stores fell 12 percent last month after gaining 6.3 percent in July. U.S. automakers sold 16.8 million cars and light trucks at an annual rate last month, trailing July's 20.9 million, which was the most since October 2001. Automakers including General Motors Corp., Ford Motor Co. and DaimlerChrysler AG offered employee discounts to all buyers in July, causing sales to soar.
Ford said on Sept. 6 it will extend its incentive program until Oct. 3 for 2005 models. The second-biggest automaker is also offering an additional $1,000 cash on sales of some 2005 models that are financed through Ford Motor Credit Co., a unit that makes car and truck loans.
``The only big month recently that wasn't auto-related was in April, when we saw a very large rise in non-auto sales,'' said Kevin Harris, chief economist at Informa Global Markets in New York. ``Otherwise it has been GM, Ford and Chrysler leading sales.''
Sales excluding autos, gasoline and building materials, used in calculating gross domestic product, rose 0.5 percent last month after no change in July. The government uses data from other sources to calculate the contribution from the three excluded categories.
Consumer Spending
Consumer spending this quarter may grow at a 3.5 percent annual pace, economists in a Bloomberg survey from Aug. 31 to Sept. 8 said. That is 0.2 percentage point less than forecast last month. Spending the last three months of the year may grow 2.4 percent, down from the 3 percent estimated in August.
Rising fuel prices ``suck income out of people's pockets,'' U.S. Treasury Secretary John Snow told executives from McDonald's Corp., the world's largest restaurant chain, at a conference in Washington yesterday. ``Retail is almost inevitably going to face, and the restaurant business is going to face, some direct consequences from these higher prices.'' Snow said the economic effects of Hurricane Katrina will be temporary.
Gasoline
The average price of a gallon of gasoline for all grades rose to $2.53 in August from $2.33 a month earlier, according to the Energy Department. Prices climbed to a record $3.12 a gallon in the first week of this month before falling to $3 a gallon in the week ended Sept. 12.
Sales at service stations rose 4.4 percent last month following a 4 percent increase in July.
Stores selling building materials and garden supplies showed a 0.5 percent increase in sales last month following a 0.2 percent fall in July.
Sales at general merchandise stores, which include department stores, rose 0.3 percent last month after falling 0.2 percent. Sales at clothing and accessory stores were unchanged declining 0.9 percent. Department stores sold 0.3 percent less merchandise.
Sales at U.S. retailers including Wal-Mart rose a less- than- expected 3.6 percent in August, according to the International Council of Shopping Centers. The figures suggest record gasoline prices were already cutting spending on clothing and back-to- school items.
Wal-Mart
``Where you have your slowness is in the things that people don't have to have,'' Wal-Mart Chief Executive H. Lee Scott said at a meeting with analysts in Boston on Sept. 7. ``With higher fuel prices, we are seeing an increasing difference between the first of the month and the end of the month,'' with spending winding down as the month goes along.
Sales at electronics and appliance stores rose 0.3 percent, while furniture sales gained 0.9 percent, today's report showed. Purchases at sporting goods, hobby, book and music outlets increased 0.5 percent while sales at food and beverage stores rose 0.6 percent. Sales at restaurants and drinking places were unchanged.
``Gas prices are up, and that means disposable income is down,'' Julia Stewart, chief executive of IHOP Corp., which has 1,200 restaurants in the U.S., said in a Sept. 7 interview. ``We've not seen the effect as of yet, but clearly time will tell'' how often consumers choose to eat out.
Glendale, California-based IHOP is the owner and franchiser of International House of Pancakes restaurants.
Non-store retailers, which include online purchases and catalog sales, rose 1.8 percent in August after a 0.4 percent decrease a month earlier.
While rising energy costs cut into spending, they also may lead to faster inflation if companies try to pass on higher costs to consumers.
``We'll certainly want to monitor what impact energy prices and possible disruptions seem to be having on consumer and business spending,'' said Janet Yellen, president of the Federal Reserve Bank of San Francisco, on Sept. 8. ``And we'll want to monitor the impact on prices and possible inflationary developments.''
A day earlier, Fed Bank of Chicago President Michael Moskow said that while the hurricane may temporarily restrain growth, policy makers need to address inflation pressures with ``appropriate'' rate increases.
The Fed has raised the overnight bank lending rate 10 times since June 2004, to 3.5 percent. It is scheduled to next vote on the benchmark interest rate on Sept. 20.
To contact the reporter on this story: Courtney Schlisserman in Washington at cschlisserman@bloomberg.net
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