Household purchases, which account for about 70 percent of the economy, were unchanged after a 0.3 percent gain in April, according to the median estimate of 75 economists surveyed by Bloomberg News. Another report may show consumer sentiment dropped in June to a six-month low.
Merchants from CarMax Inc. (KMX) to Red Robin Gourmet Burgers Inc. (RRGB) are feeling the pinch of restrained household incomes tied to a jobless rate that’s exceeded 8 percent for 40 straight months. While gasoline prices are less of a burden on Americans, the absence of bigger employment gains will make it tough for spending and the expansion to accelerate.
“The drawdown in savings, lower energy prices, weaker job growth, you stir that up and what you get is a slightly softer consumer spending profile,” said Eric Green, global head of foreign exchange, rates and commodities at TD Securities in New York. “We’re looking for a deceleration in consumer spending relative to what we saw in recent quarters.”
The Commerce Department will release the report at 8:30 a.m. in Washington. Economists’ forecasts ranged from a decline of 0.3 percent to a gain of 0.3 percent.
The data may also show incomes grew 0.2 percent in May for a second month, the weakest back-to-back gains since October and November, according to the survey median.
Retail Sales
An early indicator of spending by consumers, retail sales fell in May for a second month, Commerce Department figures showed June 13. Purchases excluding automobiles slumped by the most in two years.
Cooling demand coincides with a weakening of the labor market. Companies added 82,000 workers to payrolls last month, the fewest since August. Next week, the Labor Department may report private payrolls, which exclude government agencies, rose by about 100,000 in June, completing the weakest quarter since January-March 2010, according to the Bloomberg survey median.
Consumers have had to rely on savings to boost spending as income growth slowed. The saving rate slipped to 3.4 percent in April, matching February as the lowest reading since December 2007.
A report yesterday showed the economy expanded at a revised 1.9 percent annual rate in the first quarter, underpinned by a gain in consumer spending that’s showing signs of fading. Household purchases rose at a 2.5 percent annual pace compared with a previously reported 2.7 percent gain. The prior quarter’s rise was 2.1 percent.
Consumer Sentiment
Dwindling income prospects are also souring household sentiment. At 9:55 a.m., a report from Thomson Reuters/University of Michigan may show its final index of consumer sentiment fell to 74.1, matching the preliminary figure and the lowest since December, according to the Bloomberg survey median.
“The casual dining industry started off strongly in January, February and then hit some major headwinds,” Stephen Carley, chief executive officer of Red Robin Gourmet Burgers, said during an investor conference on June 19. “That reflects both consumer confidence being at risk and the fact that discretionary income is down for consumers. Unemployment continues to be a tremendous damper.”
Households may also be growing wary of buying big-ticket items like vehicles. Cars and light trucks sold at a 13.7 million annual rate in May, the slowest this year and down from April’s 14.4 million pace, Ward’s Automotive Group data show.
Consumer Drag
“The weak economy and high unemployment rate continues to be a drag on the consumer,” Thomas Folliard, chief executive officer at CarMax, a Richmond, Virginia-based used-vehicle retailer, said on a conference call with analysts on June 21.
Retail shares have declined on signs Americans are spending less. The Standard & Poor’s Supercomposite Retailing Index has fallen 8 percent since the end of April, compared with a 4.9 percent decrease for the broader S&P 500.
Declining fuel prices may be a lone bright spot for consumers. The cost of a gallon of regular gasoline at the pump has fallen 57 cents to $3.37 after reaching a high in early April, according to AAA, the largest U.S. auto group.
Bloomberg Survey
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Pers Pers Chicago U of Mich
Inc Spend PM Conf.
MOM% MOM% Index Index
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Date of Release 06/29 06/29 06/29 06/29
Observation Period May May June June F
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Median 0.2% 0.0% 52.3 74.1
Average 0.2% 0.0% 52.6 74.2
High Forecast 0.4% 0.3% 56.0 76.0
Low Forecast -0.2% -0.3% 50.0 72.0
Number of Participants 69 75 51 53
Previous 0.2% 0.3% 52.7 74.1
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4CAST Ltd. 0.1% -0.1% 54.0 74.5
ABN Amro Inc. --- -0.1% 52.0 74.5
Action Economics 0.2% 0.0% 52.0 73.5
Aletti Gestielle 0.2% 0.1% 52.0 74.1
Ameriprise Financial Inc 0.2% 0.1% 52.5 73.2
Banca Aletti & C spa 0.1% 0.2% 51.5 75.0
Bantleon Bank AG 0.2% 0.0% 52.2 74.8
Barclays 0.2% -0.1% 50.5 75.0
Bayerische Landesbank 0.3% 0.2% --- 74.1
BBVA 0.1% 0.1% 52.0 74.0
BMO Capital Markets 0.2% -0.3% 53.0 73.5
BNP Paribas 0.0% -0.1% 54.5 75.0
BofA Merrill Lynch Resear 0.2% -0.1% 50.5 75.0
Briefing.com 0.0% 0.1% 52.0 73.0
Capital Economics 0.3% 0.2% --- 74.1
CIBC World Markets 0.0% 0.1% --- ---
Citi 0.1% -0.1% 54.0 76.0
ClearView Economics 0.2% 0.1% 50.0 ---
Comerica Inc 0.1% 0.0% --- ---
Commerzbank AG 0.4% -0.1% 53.0 ---
Credit Agricole CIB 0.1% 0.1% --- 74.0
Credit Suisse 0.1% -0.2% --- 74.0
Daiwa Securities America 0.1% 0.1% --- ---
Danske Bank 0.2% 0.0% 52.0 ---
DekaBank 0.2% 0.0% 52.0 ---
Desjardins Group 0.1% -0.2% 53.0 74.5
Deutsche Bank Securities 0.2% 0.2% 52.0 74.1
Deutsche Postbank AG --- 0.2% --- 74.1
Exane --- 0.0% 53.0 ---
First Trust Advisors 0.3% 0.0% 55.1 75.0
Goldman, Sachs & Co. 0.2% 0.1% 52.5 76.0
Helaba 0.2% 0.0% 53.0 ---
High Frequency Economics 0.2% -0.1% 50.0 ---
HSBC Markets 0.2% 0.1% 54.5 74.1
Hugh Johnson Advisors 0.3% 0.2% 56.0 74.0
IDEAglobal 0.3% 0.2% 51.0 74.5
IHS Global Insight 0.2% -0.1% 52.0 74.8
Informa Global Markets 0.1% 0.0% 53.0 73.8
ING Financial Markets 0.2% 0.1% 53.9 75.3
Insight Economics 0.1% -0.1% 53.0 74.0
Intesa Sanpaulo 0.1% 0.0% 53.0 74.5
J.P. Morgan Chase 0.2% 0.0% --- 74.0
Janney Montgomery Scott L -0.2% 0.1% --- ---
Jefferies & Co. 0.2% 0.0% 53.5 ---
John Hancock Financial 0.1% 0.2% --- ---
Landesbank Berlin 0.2% 0.0% 51.5 74.3
Landesbank BW 0.0% -0.1% 51.0 74.2
Maria Fiorini Ramirez Inc 0.2% 0.0% --- ---
Market Securities --- -0.1% --- ---
MET Capital Advisors --- 0.2% --- ---
Mizuho Securities 0.1% -0.2% 52.0 72.0
Moody’s Analytics 0.2% 0.0% 53.5 74.0
Morgan Stanley & Co. 0.2% -0.1% --- ---
National Bank Financial 0.1% 0.1% --- ---
Natixis 0.1% 0.0% --- ---
Nomura Securities Intl. 0.3% 0.3% 51.2 ---
Nord/LB 0.2% 0.2% 51.5 74.0
OSK Group/DMG 0.2% 0.0% --- 74.0
Pierpont Securities LLC 0.1% -0.1% --- 74.5
PineBridge Investments 0.2% 0.1% 51.0 74.7
PNC Bank 0.2% -0.1% --- 75.5
Raiffeisenbank Internatio 0.3% 0.0% --- 74.5
RBC Capital Markets 0.2% -0.1% 52.0 72.0
RBS Securities Inc. 0.2% 0.0% --- ---
Scotiabank 0.1% 0.0% 51.5 74.0
SMBC Nikko Securities 0.1% 0.3% 55.0 73.8
Societe Generale 0.2% -0.1% 53.2 ---
Standard Chartered 0.1% 0.1% 53.1 74.5
Stone & McCarthy Research 0.1% 0.1% 52.3 74.5
TD Securities 0.1% 0.2% 52.0 73.0
UBS 0.2% -0.1% --- 74.1
UniCredit Research --- --- --- 74.0
University of Maryland 0.2% 0.0% 53.3 74.1
Wells Fargo & Co. 0.3% 0.1% --- ---
Westpac Banking Co. 0.1% 0.0% 55.0 73.9
Wrightson ICAP --- 0.0% 53.0 74.5
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Source : Bloomberg
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