Retail sales in the U.S. rose less than forecast and consumer confidence fell to a five-month low, signaling weakness in the world’s largest economy days before Federal Reserve policy makers meet to consider paring stimulus.
Purchases climbed 0.2% in August, the smallest gain in four months, after a revised 0.4% July advance that was bigger than previously estimated, the Commerce Department reported today in Washington. The Thomson Reuters/University of Michigan’s preliminary September gauge of sentiment dropped more than projected, to 76.8 from 82.1.
“The consumer has lost a bit of enthusiasm,” said Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit and the second-best forecaster of retail sales the past two years, according to data compiled by Bloomberg. “Retail sales are still growing, though not as solidly as before.”
Higher payroll taxes, limited employment opportunities and restrained income growth are testing consumers’ desire to shop. The data, which followed a smaller-than-forecast increase in August payrolls, sent Treasuries higher on bets Fed policy makers will throttle back more slowly on the pace of bond purchases aimed at boosting the economy.
The yield on the 10-year Treasury note fell two basis points, or 0.02 percentage point, to 2.89% at 12:46 p.m. in New York. The Standard & Poor’s 500 Index climbed 0.2% to 1,686.76 as it headed for its best week since July.
American companies may find relief in a global economy that’s shown signs of picking up. Economists raised their growth estimates for U.K. gross domestic product to 1.3% this year and 2% in 2014, according to a Bloomberg survey median of 48 projections. They previously projected 1% growth in 2013 and 1.7% next year.
The median U.S. retail sales forecast of economists surveyed by Bloomberg called for a 0.5% advance. Estimates of the 85 economists ranged from gains of 0.2% to 0.9% after a previously reported 0.2% increase in July.
Eight of 13 major categories showed increases last month, led by auto dealerships, electronics outlets and furniture stores, according to today’s Commerce Department report. Purchases of building materials, clothing and sporting goods fell. Sales excluding autos rose 0.1% after a 0.6% rise in July.
“The consumer continues to tag along slowly but surely,” said Eugenio Aleman, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “We have to see better job growth, better income growth.”
The Michigan sentiment survey’s current conditions index, which takes stock of Americans’ view of their personal finances, fell to a five-month low in September. The measure of expectations six months from now plunged to the lowest level since January.
Fed officials begin a two-day meeting on Sept. 17 and will consider when to begin scaling back $85 billion in monthly bond purchases intended to spur employment and the economy.
Companies created 169,000 jobs last month, fewer than economists projected, and gains in the previous two months were revised down. Unemployment fell to 7.3%, the lowest since December 2008, as workers left the labor force. August and July were the weakest back-to-back months for payroll gains in a year.
The slower progress in employment has also been accompanied by limited income growth. Disposable income, or money left over after taxes, increased 0.8% in July after adjusting for inflation, according to the Commerce Department. In 2012, it rose 2%.
Fed efforts to hold down borrowing costs have encouraged some Americans to make big-ticket purchases. Today’s retail sales report showed automobile dealer receipts climbed 0.9% after a 0.5% drop the prior month.
Cars and light trucks sold in August at the fastest annualized rate since November 2007, according to data from Ward’s Automotive Group. Sales at General Motors Co., Ford Motor Co., Toyota Motor Corp. and Honda Motor Co. all exceeded analysts’ estimates.
Vehicle sales strengthened at the expense of declining demand for other goods. Purchases excluding autos, gasoline and building materials, the figure used to calculate gross domestic product, rose 0.2% after a 0.5% increase in the previous month, the Commerce Department data showed.
At clothing chains, spending fell 0.8%, while general merchandise stores posted a 0.2% decline. Furniture sales rose, reflecting this year’s rebound in the housing market.
Some higher-end retailers, including fashion accessory designer Michael Kors Holdings Ltd. and home furnishings outlet Restoration Hardware Holdings Inc., are reporting strong traffic at their stores.
Restoration Hardware, based in Corte Madera, California, is part of a $143 billion furnishings business that caters to more affluent spenders. The company is planning a series of design centers to showcase its furnishings, fixtures and textiles, said Carlos Alberini, co-chief executive officer.
“In many cases we are bringing new customers in, but also we are seeing that our existing customers are buying more of what we are offering,” Alberini said at a Sept. 11 conference. “In all these cases, there is pent-up demand in our customer base for these type of products that we are about to offer.”