Retail sales on the rise in the US

Updated: 2011-11-14 07:54

By Shobhana Chandra (China Daily)

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Retail sales on the rise in the US

Pedestrians in front of a store advertising a sale in New York. [Scott Eells / Bloomberg]

WASHINGTON - Retail sales probably rose in October and the United States manufacturing accelerated, helping give the world's biggest economy a boost entering the final months of 2011, economists said before reports last week.

The 0.3 percent rise in purchases would follow a 1.1 percent gain that was the most in seven months, according to the median forecast in a Bloomberg News survey ahead of Commerce Department figures on Nov 15. Industrial production climbed 0.4 percent, twice as much as in September, according to the survey median. The cost of living was little changed and home construction cooled, other data may show.

Unemployment at 9 percent and limited wage growth help explain why retailers like Macy's Inc and Kohl's Corp plan to use more discounts to lure consumers this holiday shopping season. At the same time, equipment purchases and record exports are propelling manufacturing and sustaining a recovery that's yet to extend to the housing market.

"There's positive momentum in demand, which suggests retailers should see a decent Christmas," said Scott Brown, chief economist at Raymond James & Associates Inc in St Petersburg, Florida. "The economy is continuing to expand although it's not firing on all cylinders."

Retail sales may reflect improved demand for cars as Americans returned to showrooms. Auto purchases ran at a 13.2 million annual rate in October, the highest since February and up from a 13.04 million pace in September, according to data from Ward's Information Products.

"Consumers are just saying it's time to get a new vehicle," Ken Czubay, Ford Motor Co's US sales chief, said in a Nov 1 conference call. "We're seeing that more and more every day from our dealers."

Sales excluding automobiles climbed 0.2 percent in October after a 0.6 percent jump, according to the median forecast in the Bloomberg survey.

Even with the projected slower pace in retail sales, consumer spending in the current quarter is tracking at a 2.5 percent annual rate after a 2.4 percent pace in the third quarter, according to economists at Credit Suisse in New York.

Retailers are crafting incentives to lure more shoppers during the November-December holiday period. Kohl's, based in Menomonee Falls, Wisconsin, the fourth-largest US department-store company, said it has stepped up marketing and promotions.

Macy's, the second-biggest US department store chain, is seeing "the lower-income customer is struggling more than the middle or upper-end customer," according to Chief Financial Officer Karen Hoguet. The Cincinnati-based retailer has planned "heavy promotions" for the holiday season.

"We feel confident that the momentum we have heading into the fourth quarter, combined with our holiday strategies, bodes well for that quarter," Hoguet said in a conference call on Nov 9. "We'll have a spectacular Christmas."

The Standard & Poor's Supercomposite Retailing Index has gained 7.7 percent this year through Nov 11, while the broader S&P 500 Index climbed 0.5 percent during the same period.

Bloomberg News