August Retail Sales: Expect a Mixed Bag

Retail sales likely rose in August, but not as much as they grew in the first four or five months of 2010.Despite the searing weather and a lukewarm economic recovery, major merchants are expected to report growing retail sales in their August tallies on Thursday.

Most analysts expect an increase of between 2.5% and 3% year over year, helped by slow sales in August 2009, when shoppers were just starting to shake off the recession's shock.

That's a decent rate considering that even the Federal Reserve thinks this recovery is underachieving. But it would be a slowdown compared to the surprise growth that retailers reported in spring.

You can expect "more of the same of what we saw in June and July, which is a slowing of the growth compared to what we saw in the first four to five months of 2010," says Mike Berry, director of industry research for MasterCard Advisors SpendingPulse. That's not necessarily a disappointment, but indicates that year-over-year comparisons are becoming more apples-to-apples, he adds.

Winners and Losers

With back-to-school shopping in full swing, observers are expecting an August bump in areas such as apparel and electronics, while luxury sales will continue to suffer from the stock market's swings. SpendingPulse, which tracks credit-card transactions and other payments, estimates that apparel sales were up 2.6% in August, while electronics sales rose 2.3%.

The International Council of Shopping Centers noted that while weekly sales tallies in August were higher than those in the same month last year, the tallies slowed each week as the month progressed, with the last week of the month posting an increase of only 0.1% compared to the year-ago week.

"Bouts of warmer than normal weather continued to curb fall merchandise demand," Chief Economist Michael Niemira said in a statement. However, he stuck to his forecast of 3% year-over-year sales growth for the month.

Most analysts said the weather may be cutting into some apparel sales, as parents put off buying fall clothes until after school starts. "With the weather still very warm, kids are wearing shorts well into September," says Rob Samuels, managing director of Phoenix Partners Group.

Sales Tax Breaks Helped

On the plus side, retailers probably got a boost from sales-tax holidays in 19 states, including several large states -- such as Massachusetts, Illinois and Florida -- that didn't have them last year. "Some tax free states definitely saw a decent bump in business over those weekends," wrote Samuels, in a note to investors.

Thomson Reuters analysts, who expect 2.5% sales growth in August, also noted that some positive economic data this week might play a role in boosting retail sales. Among them: improved consumer confidence numbers, which indicate the public's outlook for employment is improving -- a key factor in shoppers' decisions to spend money.

Observers expect sales to grow higher in September, but by then, the year-over-year comparisons will get tougher. Sales in many retail sectors still haven't caught up to those before the economic crisis began two years ago, Berry notes. For example, electronics sales are still down about 9% compared to 2008, he says.

"We're still quite a ways behind from where we were before the big slowdown that came in October of 2008," Berry says. "We still have a ways to go."

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Robert & Lisa

Proverbs 13:23 A poor man's farm may have good soil but injustice (Obama) robs him of it's riches.

September 01 2010 at 7:27 AM Report abuse rate up rate down Reply