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Retail sales, producer-price data coming up
By Ruth Mantell, MarketWatch
Last Update: 12:01 AM ET Sep 7, 2008
WASHINGTON (MarketWatch) -- The markets are suffering, the economy is losing jobs and there's concern that consumers may have lost their appetite for shopping.
A government report Friday showed that the unemployment rate for August rose to 6.1% -- the highest level in five years -- approaching a peak of 6.3% that was seen during the last recession.
Other recent reports also have shown depressing results for the labor market. Historically, summers have seen a slowdown in layoff announcements. But this year, between May and August, job-cut announcements actually rose 30% from the preceding four months, according to consultancy Challenger, Gray & Christmas.
Some already have called for additional unemployment aid for workers. With Congress returning from recess this week, observers can expect to hear more this month about a possible second economic-stimulus package.
White consumers clearly are worried about jobs, they did perk up a bit in August, according to estimates. A Friday report on sentiment will show whether that is a persistent trend.
Since there's no denying the importance of consumers to the American economy, some of the most anticipated data this week will be for retail sales.
Other important reports this week will be on producer prices, the trade balance and pending home sales. The markets also are likely to be keeping an eye on the Treasury, looking for signs that the government will step in to shore up mortgage giants Fannie Mae FNM and Freddie Mac FMC.
Retail sales
Analysts have been concerned about consumers running out of steam, especially as rebates dwindle and home prices fall.
In July, U.S. retail sales dropped 0.1%, as falling auto sales offset an increase in gasoline sales that were sparked by higher prices. On Friday, the government will report results for August, and Wall Street analysts are looking for a gain of 0.1%. Excluding autos, analysts expect retail sales to decline 0.2%.
Global Insight analysts expect an overall gain, helped by autos.
"Led by a rebound in vehicle purchases, retail sales increased an estimated 0.6% in August, their best gain since May," according to a research note from Global Insight. "Excluding the automotive group, retail sales probably fell 0.1%, held back by a drop of nearly 4% in gasoline prices."
Credit Suisse analysts forecast retail sales gaining 0.4%. Excluding autos, a decline of 0.2% is expected.
"August vehicle sales rebounded from the disastrous July, which should prop up headline retail sales," according to Credit Suisse. "The nonauto result should look softer by comparison, as the effects of the fiscal stimulus wane, housing woes continue to put downward pressure on home-improvement spending and gas-station sales decline sharply -- in line with the August dip in gas prices."
Producer prices
Also Friday, the government will report on producer prices in August. In July, the PPI gained 1.2%, while the core reading, which excludes food and energy, rose 0.7%.
For August, analysts are looking for PPI to decline 0.3%. The core is expected to rise 0.2%.
"After three consecutive increases in excess of 1%, the headline PPI is expected to register a decline in August," according to a Bank of America research note. "Not only were energy prices down, but food prices are expected to be off. Due in part to sharply higher passenger-car and light-truck prices, core prices registered an outsized gain of 0.7% in July."
Bank of America is looking for PPI to fall 0.6%. The analysts see core PPI gaining 0.2%, but noted that there is downside risk from "extensive vehicle discounting."
Trade balance
On Thursday, the government will report the trade balance for July.
Last month, the Commerce Department reported that the U.S. trade deficit narrowed by 4.1% to $56.8 billion in June on record exports and a decline in nonoil imports. The nonpetroleum trade deficit fell to the lowest level in five years.
For July, analysts are expecting a trade deficit of $58 billion. Global Insight expects a $61.5 billion deficit, driven by higher imported oil prices.
"With oil prices now down sharply from their July peak, the oil bill will fall back in coming months," according to a Global Insight research note. "We also expect to see some widening in the nonoil deficit, which narrowed dramatically in June, helped by surging exports. The improvement in exports is far from over, but we expect a pause in July after June's big gains."
Pending home sales
Falling house prices have taken a toll on consumers and the markets, and the pending home-sales report on Tuesday should give some indication of whether a bottom is in sight.
Last month, the National Association of Realtors reported that its pending home-sales index, which is considered to be a leading indicator of existing home sales, rose 5.3% in June.
Some analysts have seen stability in recent pending home-sales data, though it may still be too early to call a bottom to the market. For July, analysts are looking for a decline of 1%. J.P. Morgan is looking for a decline of 3%.
"Month-to-month changes in the index have been unusually volatile lately," wrote J.P. Morgan analysts in a research note. "We expect the index to have fallen 3% in July, partly because it leapt a large 5.3% the previous month. The elevated level of mortgage rates also provide a more fundamental case why the pending home-sales index might have declined."
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