Ahead of the Bell: Retail sales

Retail sales likely rose again in July, boosted by the government's
popular Cash for Clunkers program. Economists surveyed by Thomson
Reuters expect retail sales rose 0.7 percent last month after a 0.6
percent increase in June. However, economists do not believe consumer
spending will look as strong excluding auto sales. The Thomson
Reuters consensus view is that retail sales, excluding autos, will
show a modest 0.1 percent increase, weaker than the 0. 3 percent
gain in June. Economists at IHS Global Insight expect modest gains in
many areas outside of autos to be offset by a big drop in sales at
gasoline stations due to falling prices at the pump. The retail
sales figures are not adjusted for price changes. Reports last week
from the nation's major chain stores indicated that shoppers remained
tightfisted in July as households struggle with continued job
layoffs and the nation's longest recession since World War II. A big
concern now is whether worried consumers will cut back on their
back-to-school in coming weeks and their holiday shopping later this
year. Offsetting the weakness at many retail stores will be an
additional $2 billion funding from Congress for the Cash for
Clunkers program, which gives people trading in certain types of
vehicles up to $4 ,500 if they increase their mileage by at least
5-10 mpg. The program was created to provide help to the beleaguered
auto industry and the environment. The program has proven popular,
helping to boost unit sales of light vehicles in July to the highest
level since last September. Economists hope that such programs and the
government's other economic stimulus efforts will help bolster the
consumer sector and bring and end to a recession that began in
December 2007. Many economists expect the recession will end in the
current July-September period although they caution that the recovery
is likely to be anemic given all the problems still facing the
economy. They forecast that the unemployment rate, which dipped to
9.4 percent in July, will top 10 percent early next year. The
Federal Reserve, concluding its first meeting since the economy
flashed more definitive signs of turning a corner, kept a key
interest rate near a record low where it has been since last
December and pledged to hold rates at low levels for "an extended
period."