By Bob Willis
June 8 (Bloomberg) -- Sales at U.S. retailers probably rose in May as Americans started spending tax rebate checks and record gas prices inflated service-station receipts, economists said before reports this week.
Purchases rose 0.5 percent following a 0.2 percent drop the prior month, according to the median estimate in a Bloomberg survey before the Commerce Department's report on June 12. Other reports may show rising food and fuel prices pushed up the cost of living and the housing slump showed no sign of abating.
Retailers have started benefiting from about $57 billion in tax-rebate checks the government has sent out so far in a bid to revive the economy. Still, the improvement may be short-lived as tighter credit, plummeting property values and a weakening labor market signal consumers will retrench.
``It's temporary good news,'' said Jonathan Basile, an economist at Credit Suisse Holdings Inc. in New York. ``It's tax- rebate induced and that is a transitory stimulus. There is a laundry list of factors working against the consumer right now.''
Retail sales excluding automobiles increased 0.7 percent last month after a 0.5 percent rise in April, according to the Bloomberg survey median. More spending at service stations, reflecting the jump in gasoline prices, probably boosted the figure, economists said.
The cost of gasoline has risen 31 percent so far this year, reaching a record $3.99 a gallon last week for regular unleaded, according to AAA. Food prices are also surging, prompting shoppers to frequent discount stores searching for bargains.
Cashing Checks
Wal-Mart Stores Inc., the world's largest retailer, had a 3.9 percent jump in same-store sales last month, as consumers bought cut-rate staples and took advantage of promotions linked to the tax rebates.
``Many of our customers need to live from paycheck to paycheck,'' Wal-Mart Chief Financial Officer Thomas Schoewe told reporters last week. ``The amount they're spending on basics is a big portion of the total basket.''
Consumers cashed $350 million in rebate checks at Wal-Mart stores, Schoewe said. The retailer doesn't know how much of that was spent at the chain.
``Consumers should start to respond to the additional cash by increasing spending,'' said Michael Hanson, an economist at Lehman Brothers Holdings Inc. in New York. ``The rebate will act like a shot of caffeine,'' even as its effects ``will be temporary.''
Consumers aren't spending on big-ticket items like automobiles, reflecting slumping confidence and weakening household finances. Cars and light trucks sold at a 14.3 million annual pace in May, the fewest since July 1998, according to industry data.
Smaller Gain
Spending may grow at an annual rate of 0.5 percent this quarter, down from a 1 percent pace in the first three months of the year that was the weakest since the 2001 recession, according to the median estimate of economists surveyed by Bloomberg News last month.
The bulk of the tax rebates will probably be spent from July through September, giving third-quarter growth a lift, before the economy decelerates again in the last three months of the year, the poll also showed.
With gasoline surging, consumer prices rose 0.5 percent last month, the most since November, according to the median forecast ahead of the Labor Department's June 13 report. Excluding food and energy, prices probably rose 0.2 percent after a 0.1 percent rise in April.
Price increases fueled by the jump in commodity costs will probably prompt the Federal Reserve to hold rates steady at its June 25 meeting, according to trading in the futures market.
Trade Deficit
The rising cost of oil probably caused the trade deficit to widen to $59.9 billion in April from $58.2 billion the prior month, according to the survey median ahead of the June 10 report from the Commerce Department.
Another report on June 9 may show contract signings to buy existing homes continued to slump. The National Association of Realtors may report pending home resales fell 0.5 percent in April following a 1 percent decline the prior month, according to a Bloomberg survey of economists.
With housing in freefall and fuel prices surging, consumers have no reason to be optimistic. The Reuters/University of Michigan preliminary sentiment index for June may decline to 59.5, the lowest since 1980, from 59.8, according to a Bloomberg survey before the survey's June 13 release.
Bloomberg Survey
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Release Period Prior Median
Indicator Date Value Forecast
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Pending Homes MOM% 6/9 April -1.0% -0.5%
Trade Balance $ Blns 6/10 April -58.2 -59.9
Federal Budget $ Blns 6/11 May -67.7 -164.5
Import Prices MOM% 6/12 May 1.8% 2.5%
Import Prices YOY% 6/12 May 15.4% 17.2%
Retail Sales MOM% 6/12 May -0.2% 0.5%
Retail ex-autos MOM% 6/12 May 0.5% 0.7%
Initial Claims ,000's 6/12 8-Jun 357 370
Cont. Claims ,000's 6/12 1-Jun 3093 3118
Business Inv. MOM% 6/12 April 0.1% 0.3%
CPI MOM% 6/13 May 0.2% 0.5%
Core CPI MOM% 6/13 May 0.1% 0.2%
CPI YOY% 6/13 May 3.9% 3.9%
Core CPI YOY% 6/13 May 2.3% 2.3%
U of Mich Conf. Index 6/13 June P 59.8 59.5
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To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net
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