Star-Bulletin news services
Confidence and sales
seen higher this week
U.S. retail sales rebounded in May as confident consumers took advantage of discounts offered by department stores and other merchants, economists say reports may show this week.
Sales excluding motor vehicles and parts may have risen 0.2 percent in May, according to economists surveyed by Bloomberg News in advance of Thursday's report by the Commerce Department in Washington.
Including car dealers, sales may have been unchanged after a 0.1 percent decrease in April.
A survey of consumer sentiment by the University of Michigan may show an increase to the highest in a year, economists said. Combined with price cuts, cheaper borrowing and energy costs, and extra money from $330 billion in tax cuts, the rise in confidence may set up increased spending and an acceleration of the economy.
"The outlook for consumer spending has to be favorable," said Geoffrey Somes, a senior economist at Fleet Bank in Boston. "Sales are strengthening along with consumer confidence. If confidence continues to strengthen, then I would expect that pattern of strength in consumer spending will continue."
The Michigan sentiment index, to be reported Friday, may rise to 93.1 this month from 92.1 last. Such a reading would be the highest since 96.9 in May of last year.
Wal-Mart Stores Inc. and J.C. Penney Co. were among retailers whose sales rose last month amid price cutting at chains and increased optimism after the Iraq war.
Household purchases account for more than two-thirds of the economy. Any acceleration is expected to help spur manufacturing and boost corporate confidence that the economy is strong enough to warrant adding workers to payrolls.
Best Buy Inc. said Friday that its sales rose 11 percent in the first quarter as demand increased for televisions and digital cameras. Sales rebounded after the end of the war to $4.67 billion from $4.2 billion a year earlier.
The value of retail sales reported by the Commerce Department is being held down by discounting and price cuts by merchants to attract shoppers. The Labor Department will report Friday that prices paid to producers last month declined 0.2 percent, according to economists surveyed. The index measuring prices paid to factories, farms and other producers fell 1.9 percent in April.
New cars and light trucks sold in May at a seasonally adjusted annual rate of 16.1 million, down from 16.5 million a month earlier.
General Motors Corp., the world's biggest automaker, offered an estimated $3,916 a vehicle in rebates and incentives last month, helping to boost its sales 0.6 percent.
General Motors extended offers of no-interest loans and rebates of as much as $4,000 on some vehicles to July 7, following similar promotions by the Chrysler unit of DaimlerChrysler AG.
On Wednesday, the Federal Reserve will issue its roundup of economic conditions as assessed by the 12 regional Fed banks.
The report will be the last one before policy makers meet June 24-25 to decide whether to lower interest rates.
The so-called beige book "will indicate that business activity was more mixed in recent weeks," said Steven Wood, principal economist at Insight Economics in Walnut Creek, Calif.
Other reports this week:
>> Today, the Commerce Department may report a 0.2 percent increase in April wholesale inventories after a 0.5 percent jump.
>> Wednesday, a Labor Department report may show no change in May import prices at an energy-led 2.7 percent decline a month earlier.
>> Thursday, the Labor Department may say that initial jobless claims declined to 425,000 in the week that ended Saturday from 442,000 the prior week.
>> Also Thursday, the Commerce Department is forecast to report a 0.2 percent increase in April business inventories after a 0.4 percent rise.
>> Friday, the Commerce Department may report a narrowing in the April trade deficit to $42 billion from March's $43.5 billion.
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