Sales at US retailers grew last month at the slowest pace of the year, pointing to a deceleration in demand that may further restrain employment, economists said before reports are released this week.
Purchases increased 0.2 percent following a 0.4 percent April gain, according to the median estimate of 58 economists surveyed by Bloomberg News before US Department of Commerce figures are released on Friday. Other reports may show the trade gap widened and consumer confidence rose.
Companies pulled back on hiring last month, making it likely consumers will continue to keep a lid on spending, which accounts for about 70 percent of the economy. Discounters Target Corp and TJX Cos were among merchants reporting gains in last month’s sales, indicating households are looking for bargains to stretch out their paychecks.
“Consumer spending can only grow at a modest pace, in fits and starts,” the chief US economist at Maria Fiorini Ramirez Inc in New York, Josh Shapiro, said. “We’re not going to get a sharp rebound in jobs and therefore income is only going to grow at a modest pace.”
Employers excluding government agencies added 41,000 workers to payrolls last month following a 218,000 increase in April, the US Department of Labor reported last week. Total payrolls rose by 431,000 as the federal government hired 411,000 temporary workers to help conduct the census. These employees will be dismissed over the next few months as the decennial population count is completed.
Last month’s increase in sales may also have been less broad-based than in prior months. Purchases at 30 chains rose 2.7 percent from a year earlier, less than a 2.9 percent projected gain, Retail Metrics said last week.
Consumers sought discounts after unemployment rose in April and the sovereign-debt crisis in Europe intensified. Sales at Target, the second largest US discount retailer, rose 1.3 percent in stores open at least a year.
“Comparable-store sales were somewhat below our expectation,” Gregg Steinhafel, chief executive officer of Target, said in a statement on May 19. “Our recent experience reinforces our belief that we will continue to experience volatility in the pace of economic recovery.”
One source of strength for the retail figures may be car sales. Vehicle demand rose to an 11.64 million annual rate last month, the second-highest this year, from an 11.21 million pace in April, according to industry data.
The debt crisis in Europe raises the risk that tumbling stock prices may give households another reason to rein in spending. Shares have been pummeled since the crisis intensified, with the Standard & Poor’s 500 Index dropping 13 percent since reaching a 19-month high on April 23.
Also this week, US Federal Reserve Chairman Ben Bernanke will testify about the state of the economy before the House Budget Committee on Wednesday. Bernanke last week said joblessness was among the “important concerns” for the recovery.
Another report this week may show the European debt crisis so far has had little effect on consumer confidence. The Thomson Reuters/University of Michigan preliminary consumer sentiment index for this month increased to 74.6 from 73.6 at the end of last month, according to the median estimate of economists surveyed before the Friday release.
The need to replenish depleted inventories, combined with rising business spending and exports, is giving factories a lift. Stockpiles at US businesses rose 0.5 percent in April, a fourth consecutive gain, economists said ahead of a Commerce report on Friday.
The rebound in economic growth earlier this year has pushed up imports faster than exports, another Commerce report will show on Thursday. The trade deficit in April probably rose to US$41 billion, the most since December 2008, from US$40.4 billion the prior month, according to the median estimate of economists surveyed.
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