Retail Sales Probably Climbed in March: U.S. Economy Preview

The 0.3 percent rise in retail purchases would follow a 1.1 percent increase in February that was the biggest in five months, according to the median forecast of 71 economists surveyed by Bloomberg News ahead of Commerce Department figures tomorrow. Builders broke ground on more houses in March, sales of previously owned homes climbed and industrial production picked up, other data may show.

Better-than-estimated sales last month at chains like Gap Inc. (GPS) (GPS) and Target Corp. (TGT) (TGT) signal Americans have enough income to sustain spending and withstand higher gasoline prices. To help foster bigger gains in employment, Federal Reserve officials are sticking to a goal of keeping borrowing costs low through 2014.

“Retail sales seem to be holding up well,” said Carl Riccadonna, a senior U.S. economist at Deutsche Bank Securities Inc. in New York. “It’s sending an important signal that gasoline prices are not yet biting into spending. We’re seeing ongoing income growth.”

The smaller gain in retail sales in March from the previous month is probably due mostly to a slowdown in auto purchases. Cars and light trucks sold at a 14.3 million annual rate in March, following a 15 million pace the prior month, according to Ward’s Automotive Group. Still, the March figures capped the strongest quarter in four years.

“The industry and consumers have been very resilient in the face of higher pump prices,” Don Johnson, vice president of U.S. sales at General Motors Co. (GM) (GM), said on a call with analysts this month. “The steadily improving economy is playing a role and so is pent-up demand and an improved credit market.”

Auto Dealers

The Commerce Department’s report may show that purchases excluding auto dealers climbed 0.6 percent after a 0.9 percent gain in February.

Same-store sales for the more than 20 companies tracked by Swampscott, Massachusetts-based Retail Metrics rose 3.9 percent last month, beating the average estimate for a 3.3 percent gain, as many chains offered discounts and shoppers stocked up early on spring gear.

Sales at Gap, the largest U.S. apparel chain, climbed 8 percent. Target, the second-largest U.S. discount chain, and Macy’s Inc., the owner of Bloomingdale’s and namesake stores, each posted 7.3 percent increased. All three companies beat the average analyst projection.

Retail Shares

Investors have driven up retailer shares as spending increases. The Standard & Poor’s Supercomposite Retailing Index (S15RETL), which includes Macy’s and Gap, has gained 17 percent this year through April 13, compared with a 9 percent advance for the broader S&P 500.

The Commerce Department’s retail sales data, which aren’t adjusted for prices, may also reflect higher gasoline at the pump. Regular fuel in March averaged $3.84 a gallon, or 28 cents more than in February, according to AAA, the nation’s biggest auto group.

The economy expanded “at a modest to moderate pace” from mid-February through late March as manufacturing, hiring and retail sales showed signs of strength in the face of higher fuel prices, the Fed said in its Beige Book report on April 11. The central bank has pledged to keep its benchmark interest rate near zero until late 2014 to stimulate expansion.

Housing Starts

Housing, the industry at the heart of the last financial crisis, is stabilizing. Home starts increased to a 705,000 annual rate in March following a 698,000 pace the prior month, according to the Bloomberg survey median. The report is due from the Commerce Department on April 17.

Two days later, the National Association of Realtors may report existing-home sales rose 0.7 percent to a 4.62 million pace last month, economists in the Bloomberg survey predicted.

Industrial production rebounded last month, Fed data may show on April 17. Output at factories, mines and utilities increased 0.3 percent after being little changed in February, according to the Bloomberg survey median.

Also this week, reports on the so-called Empire gauge of manufacturing for the region served by the Federal Reserve Bank of New York and the Fed Bank of Philadelphia index may show factories sustained growth in April, albeit at a slower pace, economists said.

                         Bloomberg Survey

                        Release    Period    Prior     Median
Indicator                 Date               Value    Forecast
Empire Manu. Index        4/16     April      20.2      18.0
Retail Sales MOM%         4/16     March      1.1%      0.3%
Retail ex-autos MOM%      4/16     March      0.9%      0.6%
Retail exauto/gas MOM%    4/16     March      0.6%      0.5%
Retail control MOM%       4/16     March      0.5%      0.5%
Business Inv. MOM%        4/16      Feb.      0.7%      0.6%
NAHB Housing Index        4/16     April       28        28
Housing Starts ,000’s     4/17     March      698       705
Housing Starts MOM%       4/17     March     -1.1%      1.0%
Building Permits ,000’s   4/17     March      715       710
Building Permits MOM%     4/17     March      4.8%     -0.7%
Ind. Prod. MOM%           4/17     March      0.0%      0.3%
Cap. Util. %              4/17     March     78.4%     78.6%
Initial Claims ,000’s     4/19     14-Apr     380       370
Cont. Claims ,000’s       4/19     7-Apr      3251      3300
LEI  MOM%                 4/19     March      0.7%      0.2%
Philly Fed Index          4/19     April      12.5      12.0
Exist Homes Mlns          4/19     March      4.59      4.62
Exist Homes MOM%          4/19     March     -0.9%      0.7%

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