/www.bloomberg.com/ Washington, Sept. 13 (Bloomberg) -- U.S. retail sales probably rose in August for a third straight month as zero- interest loans spurred auto purchases, economists said in advance of today's report. Sales at other merchants probably slowed.
A 0.5 percent gain in retail sales to $305.8 billion was expected for the month following a 1.2 percent gain in July, based on the median of 64 forecasts in a Bloomberg News survey. Excluding cars, retail sales probably rose 0.1 percent, the weakest since a 0.4 percent decline in May.
``Consumers are still spending, mainly because interest rates are relatively low,'' said Bill Quan, chief economist at Mizuho Securities USA Inc. in New York. ``They're just selective about what they will buy. They will purchase if there's a bargain to be had.''
The report will underscore how the strength of sales at Ford Motor Co. and other car dealers is underpinning consumer spending, which accounts for two-thirds of the U.S. economy, economists said. Retailers such as Wal-Mart Stores Inc. and Target Corp. have reported that sales were less than forecast last month during the back-to-school season.
Other reports today will probably show that consumer optimism improved in early September and that prices at the wholesale level are tame, indicating that retail sales may not falter in coming months.
The Commerce Department will release the retail statistics at 8:30 a.m. Washington time. At the same time, the Labor Department is expected to report that its producer price index increased 0.2 percent in August after falling 0.2 percent in July, the Bloomberg News survey showed.
Prices, Confidence
Producer prices have declined for three of the four prior months, and were 1.3 percent lower in July than a year earlier. Excluding food and energy, producer prices probably rose 0.1 percent in August after declining 0.3 percent during July, economists said.
The University of Michigan is expected to report that its consumer sentiment index rose to 88 in a preliminary estimate for September from 87.6 in August, according to the Bloomberg News survey. The confidence gauge steadied a month ago after slumping in June and July. It had reached an 18-month high of 96.9 in May. The confidence statistics will be released at about 9:50 a.m.
The U.S. economy slowed to a 1.1 percent annual rate in the third quarter as consumer spending cooled. Growth is expected to rebound to a 2.7 percent pace this quarter, largely because of the strength of spending on automobiles. That would still be slower than the 3.6 percent rate that economists were expecting eight months ago, according to a Blue Chip Economic Indicators survey. Retail sales account for about one-fourth of the economy.
New Cars
Cars sold last month at an 18.7 million-vehicle pace that was the fastest of the year, according to AutoData Inc. Automakers including Ford, General Motors Corp. and DaimlerChrysler AG offered no-interest loans to clear out 2002 models, pushing sales up 18 percent from a year earlier at General Motors alone.
General Motors, the world's largest automaker, and Chrysler last week extended offers to include most 2003 models, which helps explain why sales may stay elevated this month. On Thursday, Ford is also offering no-interest loans on some 2003 models.
Such loans are possible because the Federal Reserve's 11 rate reductions last year have left the overnight bank lending rate at 1.75 percent, a 41-year low. Investors expect the Fed to delay raising interest rates until 2003. Still, some economists question the sustainability of the loans and the pace of car sales.
Sustained Sales
``How long can this last, particularly as at least some of the demand has been spurred by aggressive pricing and financing deals that are eating into automakers profits?'' Cathy Minehan, president of the Federal Reserve Bank of Boston, asked in a speech this week. ``Indeed if a further slide in equity markets were to occur, or if unemployment rises, on the heels of poor profit pictures, consumer confidence, spending and borrowing patterns would clearly be at risk.''
Consumers may already be using caution as the economy is slow to create jobs following last year's recession. Sales at Wal-Mart rose 3.8 percent in August from the same month a year earlier, missing estimates for a second straight month. Sales at Target's discount stores rose 0.5 percent, and sales at May Department Stores Co., the owner of Lord & Taylor, dropped 8.6 percent.
``Back-to-school season has just been a difficult one,'' said David Weinberg, chief financial officer of shoe designer Skechers U.S.A. Inc., in an interview Tuesday. ``The economy has been tough.'' The company projects its second-half profit will rise less than forecast because of slow sales at the retailers that carry its shoes and expectations for sluggish demand during the holiday shopping season.
Jack in the Box Inc. said its fourth-quarter profit would fall because rival hamburger chains were luring away customers with lower prices. Sales at restaurants open at least a year are expected to fall 3 percent in the quarter, compared with a 3.8 percent increase in the same period a year ago. Sales began to fall last month, said Chief Financial Officer John Hoffner in an interview.