Rising purchases suggest consumers bounced back last month after scrimping in June and May, which may set the stage for faster third-quarter economic growth. Even so, costlier gasoline and a jobless rate that has exceeded 8 percent since early 2009 threaten to limit spending gains in the second half of 2012.
“Households spent a little bit more in July, which is encouraging given that over the previous few months spending pretty much stagnated,” said Paul Dales, senior U.S. economist at Capital Economics Ltd. in London. “If we jump forward, I get a bit worried again. I don’t really expect there to be big improvements in household spending in the next few months.”
The Commerce Department will release the spending report at 8:30 a.m. in Washington. Economists’ forecasts ranged from gains of 0.2 percent to 0.7 percent. Spending fell 0.1 percent in May.
The report may also show incomes grew 0.3 percent after increasing 0.5 percent in June, according to the survey median.
An early indicator of consumer purchases, retail sales rose 0.8 percent in July, the most in five months, Commerce Department data showed Aug. 14. Receipts climbed in all 13 sales categories, the first time that’s happened since 2005.
‘Quite Good’
“The back-to-school business has been really quite good,” Ed Stack, chairman and chief executive officer of Dick’s Sporting Goods Inc. (DKS), said during an Aug. 14 earnings call. The Coraopolis, Pennsylvania-based retailer this month boosted its forecast for full-year earnings. “We’ve been very pleased with our business,” he said.
Retail shares have outperformed the broader market this year. The Standard & Poor’s 500 Supercomposite Retailing Index has climbed 24 percent since Dec. 30, compared with a 12 percent gain in the broader S&P 500.
A pickup in employment growth shored up household purchasing power last month. Payrolls rose by 163,000 workers in July, the most since February, according to Labor Department data. At the same time, the jobless rate rose to 8.3 percent, the highest level in five months.
Sustained consumer demand would boost the pace of economic expansion in the U.S. Americans’ purchases increased at a 1.7 percent annual rate in the second quarter, the smallest advance in a year.
Spending Forecast
Economists project consumer spending will increase at a 2 percent rate in the third quarter, according to the median forecast of 78 economists surveyed from Aug. 3 to Aug. 8.
Faster economic growth driven by household spending will probably hinge on bigger job gains. Measures of sentiment, nonetheless, indicate employment prospects are not picking up. The Conference Board’s index of consumer confidence fell in August by the most in 10 months, and the Bloomberg Consumer Comfort Index dropped in the week ended Aug. 19 to the lowest level since January.
Gasoline prices present an additional obstacle. The average price of a gallon of regular gasoline climbed 28 cents since July 30 to reach $3.80 on Aug. 28, according to AAA, the nation’s largest auto club. Prices at the pump will be the highest ever for the U.S. Labor Day holiday, AAA forecast.
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