Retail Sales in U.S. Jump 2.7%, Most in Three Years

Sept. 15 (Bloomberg) -- Sales at U.S. retailers surged in August by the most in three years, led by a jump in auto purchases as consumers took advantage of the government’s “cash-for-clunkers” program.

The 2.7 percent increase exceeded the median forecast of economists surveyed by Bloomberg News and followed a 0.2 percent drop in July, Commerce Department figures showed today in Washington. Purchases excluding automobiles climbed 1.1 percent, also more than anticipated.

Auto sales increased by the most in almost eight years, spurred by the Obama administration’s cash incentive to trade in older models for new, more fuel-efficient vehicles. The gain in spending was broad-based as 11 of 13 categories registered increases, easing concern that rising unemployment and a record loss of household wealth will cause Americans to retrench.

“There’s quite a bit of pent-up demand,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “At the moment, it looks like the consumer is buying goods besides autos. The outlook has brightened immeasurably.”

Treasuries declined and stock futures rose after the retail sales figures and a separate report showing that manufacturing in the New York region grew at the fastest pace in almost two years.

The yield on the 10-year note rose five basis points, or 0.05 percentage point, to 3.47 percent at 8:59 a.m. in New York. Futures on the Standard & Poor’s 500 Index rose 0.3 percent to 1,046.10.

Economists’ Forecasts

Retail sales were projected to rise 1.9 percent after an initially reported 0.1 percent decline in July, according to the median estimate of 73 economists in a Bloomberg News survey. Forecasts ranged from gains of 0.8 percent to 3.8 percent. Last month’s gain was the biggest since January 2006.

Excluding automobiles, the increase in sales was the biggest in six months. They were forecast to increase 0.4 percent, according to the survey median.

The auto plan, which ended Aug. 24, offered buyers discounts of as much as $4,500 to trade in older cars and trucks. The program prompted almost 700,000 purchases, the Transportation Department said.

Sales at automobile dealerships and parts stores jumped 11 percent, the most since October 2001 when carmakers such as General Motors Corp. offered zero-percent financing to spur sales following the terrorist attacks the previous month.

Service stations, clothing, sporting goods and department stores all recorded gains in excess of 2 percent last month, today’s report showed. Only furniture and building-material stores showed losses.

Sales Excluding Auto

Excluding autos, gasoline and building materials -- the retail group the government uses to calculate gross domestic product figures for consumer spending -- sales increased 0.7 percent, after a 0.3 percent decrease. The government uses data from other sources to calculate the contribution from the three categories excluded.

The economy has lost about 6.9 million jobs since the recession started in December 2007, the worst of any downturn since World War II. GDP contracted at a 1 percent annual rate in the second quarter, the fourth consecutive drop.

Consumer spending, which accounts for 70 percent of the economy, is projected to grow at a 1.7 percent pace from July through September and then slow to 1 percent in the last three months of the year, according to the median estimate of economists surveyed this month by Bloomberg News.

Purchases rose at an average 3.5 percent pace in the decade before the current recession began in December 2007.

Beige Book

In the Federal Reserve’s Beige Book business survey, published two weeks before officials meet to set monetary policy, the central bank reported “flat” retail sales in July and August and cited some auto-industry contacts as saying the cash-for-clunkers effect may be temporary. The Fed released the survey on Sept. 9.

“Despite some encouraging signs in the global economy, it is difficult to predict the timing and pace of any economic recovery,” Alan Graf, chief financial officer for FedEx Corp., said last week in a statement. FedEx, the second-largest U.S. package-shipping company, said first-quarter profit topped its forecast.

FedEx and larger rival United Parcel Service Inc. are considered proxies for the U.S. economy because they handle almost 80 percent of domestic package shipments.