Sales Probably Cooled as Fuel Prices Rose: U.S. Economy Preview

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from Bloomberg:



Sales Probably Cooled as Fuel Prices Rose: U.S. Economy Preview

By Bob Willis

March 9 (Bloomberg) -- Consumer spending at U.S. retailers slowed in February as increasing fuel costs eroded Americans' buying power, economists said reports this week will show.

Purchases rose 0.2 percent last month after a 0.3 percent gain in January, according to the median estimate in a Bloomberg News survey before a March 13 Commerce Department report. Figures from the Labor Department the following day may show the cost of living increased.

A weakening job market and rising gasoline costs are hurting consumer confidence and spending, increasing the odds the economy is already in a recession. Investors last week raised bets the Federal Reserve will keep cutting the benchmark interest rate, currently at 3 percent, as it focuses on reviving growth over taming inflation.

Sales are ``reflecting the many strains on consumers,'' said Drew Matus, senior economist at Lehman Brothers Holdings Inc. in New York. ``We expect the Fed to cut rates to 1.5 percent by early 2009.''

Auto purchases in February were little changed from a three-year low reached in January, according to industry figures last week. Retail sales excluding automobiles also increased 0.2 percent after a 0.3 percent January gain, according to the Bloomberg survey.

Sales at chain stores in February increased more than forecast, as consumers suffering from higher fuel bills and the slump in hiring rushed to discounters such as Wal-Mart Stores Inc., according to figures from the International Council of Shopping Centers issued last week.

Confidence Wanes

``It does seem like this consumer sentiment is continuing to be affected by housing and credit,'' Richard Wagoner, chief executive officer of General Motors Corp., said in a Bloomberg Television interview March 4. ``I honestly can't tell you when and if we're going to see things turn back this year.''

Ethan Harris at Lehman Brothers and Bruce Kasman at JPMorgan Chase & Co. were among economists last week who said the U.S. had already fallen into a recession after the Labor Department reported the economy lost 63,000 jobs in February. They joined colleagues at Merrill Lynch & Co., Goldman Sachs Group Inc. and Morgan Stanley who had previously made a similar call.

The decline in payrolls was the second in a row and the biggest since March 2003.

``It's another nail in the consumer's coffin,'' said Josh Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York. ......(more)

The complete piece is at: http://www.bloomberg.com/apps/news?pid=20601087&sid=aV9epkPC9gdk&refer=home