RETAIL sales grow because of GASOLINE!

U.S. July Retail Sales Rise 1.8%; Ex-Autos Increase 0.3% *(what is behind the rise in bonds IMHO)


Aug. 11 (Bloomberg) -- U.S. retail sales rose 1.8 percent in July, led by a jump in auto purchases and surging receipts at service stations that reflected record gasoline prices. The splurge on cars and fuel left consumers with less money to spend on anything else.
Last month's gain was less than forecast and followed a 1.7 percent June increase, the Commerce Department said today in Washington. Excluding autos, sales rose 0.3 percent, half as much as economists forecast. Also subtracting purchases at service stations, sales were unchanged.
``The recent run-up in gasoline prices took a big chomp out of consumers' wallets,'' said Nigel Gault, director of U.S. research at Global Insight Inc., a Lexington, Massachusetts-based forecasting firm, before the report. ``Even though auto sales were up in July in response to producer discount programs, the persistence of high gasoline prices is going to restrain spending in the month of August as well.''
Flat sales excluding autos and gasoline compares with an average 0.6 percent increase in the first six months of the year. Retailers including Neiman Marcus Group Inc. and J.C. Penney Co. posted smaller-than-expected sales gains in July as hot weather hurt demand for fall clothing, according to industry reports last week. Even higher fuel costs this month raise concern incomes will fail to keep pace, threatening to slow consumer purchases and economic growth later this year, economists said.
Economists expected retail sales would rise 2.1 percent last month, based on the median forecast of 72 estimates in a Bloomberg News survey. Sales excluding automobiles were expected to rise 0.6 percent following a 0.9 percent June increase.
Retail sales account for almost half of all consumer spending, which in turn accounts for about two-thirds of the economy.
Auto Sales
Sales at automobile dealerships and parts stores rose 6.7 percent last month, the most since October 2001, after rising 4.6 percent in June.
Ford Motor Co. and DaimlerChrysler AG's Chrysler unit last month matched GM's offer to extend employee discounts to all buyers. Carmakers sold 20.9 million vehicles at an annual rate last month, second only to the 21.9 million in October 2001.
Sales at filling stations increased 2.4 percent last month following a 2 percent rise in June. A jump in gasoline prices may have played a hand in boosting sales. The average price for a gallon of gasoline at the pump reached $2.33 last month, the most ever, from $2.20 in June, according to figures from the Energy Department. The average price reached a record $2.41 a gallon in the week ended Aug. 8.
Gasoline
Record gasoline prices are ``a concern,'' said Edward Zander, chief executive of Motorola Inc., the No. 2 cell phone maker, in an interview. ``If the cost of living goes up and consumers have less to purchase, this may be one item that that gets impacted, even though we don't see that yet.''
Average hourly earnings were up 2.7 percent in the 12 months ended in July, barely above the 2.5 percent increase in consumer prices in the year ended in June, according to figures from the Labor Department.
Stores selling building materials and garden supplies showed a 0.4 percent drop in sales last month following a 0.3 percent rise in June.
Sales in the retail group used to calculate gross domestic product figures on consumer spending, which excludes autos, gasoline and building materials, rose 0.1 percent last month following a 0.8 percent June increase. The government uses data from other sources to calculate the contribution from the three categories excluded.
Department Stores
Sales at general merchandise stores, which include department stores, were unchanged last month after rising 1.3 percent. Sales at clothing and accessory stores dropped 0.5 percent after a 1.1 percent increase. Department stores sold 1 percent less merchandise.
Near-record heat last month led to a mixed sales performance at chain stores, an industry report last week showed. Retailers including Neiman Marcus Group Inc. and J.C. Penney Co. posted smaller-than-expected sales gains in July as the weather hurt demand for fall clothing, according to a survey by the International Council of Shopping Centers. Discount chains, including Wal-Mart Stores Inc. and Target Corp., posted better results, helped by sales of patio furniture, sunscreen and bottled water.
Sales at electronics and appliance stores rose 1 percent, while furniture sales fell 1.3 percent, today's report showed. Purchases at sporting goods, hobby, book and music outlets increased 0.5 percent while sales at food and beverage stores fell 0.1 percent. Sales at restaurants and drinking places rose 0.2 percent.
Fed
Non-store retailers, which include online purchases and catalog sales, dropped 0.1 percent in July after a 2.7 percent increase a month earlier.
Sales of the sixth Harry Potter book, a novel by J.K. Rowling chronicling the adventures of a young wizard, will help third- quarter sales at Amazon.com rise as much as 30 percent, compared with the same period last year, the world's largest online retailer said last month. The book, titled ``Harry Potter and the Half-Blood Prince'' shattered first-day sales records.
Fed policy makers on Aug. 9 raised their target for the benchmark overnight bank lending rate to 3.5 percent from 3.25 percent, the 10th straight quarter-point increase.
``Aggregate spending, despite high energy prices, appears to have strengthened since late winter, and labor market conditions continue to improve gradually'' the central bankers said in the statement announcing the rate increase.
Consumer spending this quarter may grow at a 3.7 percent annual pace, 0.5 percentage point faster than forecast last month and the most since the last three months of 2004, according to the median estimate of economists surveyed this month by Bloomberg News.
The gain in spending will help lift economic growth to a 4.1 percent annual pace this quarter, after a 3.4 percent rate from April through June, the survey showed.
More hiring and rising incomes, together with the auto discounts, are fueling the burst in spending, economists said. Employers added 207,000 workers to payrolls in July, more than expected, and wages grew at the most in a year, the Labor Department said last week.
-- With reporting by Mike McKee in New York and Bill Koenig in Southfield, Michigan. Editor: Golle To contact the reporter on this story:
Carlos Torres in Washington ctorres2@bloomberg.net.
Last Updated: August 11, 2005 08:30 EDT