WASHINGTON (AFX) - US economic indicators to be released this week will show that retail sales declined during the first month of the year as shoppers retrenched slightly amid Enron-related concerns about corporate America and rising credit costs, economists said. Most economists will be focusing on the January retail sales report which is due to be released Wednesday as consumer spending accounts for some two-thirds of GDP growth.
Sung Won Sohn, chief economic officer at Wells Fargo & Co in Minneapolis, expects January retail sales to post a 0.5 pct decline, but he sees sales and consumer spending strengthening over the longer term as the economic recovery gathers pace.
In the near term, "the loss of confidence in the financial reporting of corporate America could hurt both consumer and business spending," Sohn said in a briefing note to clients.
He also noted that the higher cost of credit as well as the desire to strengthen the balance sheet could cause some firms to postpone capital spending plans, and that under these circumstances, "it would be difficult for consumer spending to gain momentum."
Most economists surveyed for this week's outlook expect retail sales to post a decline in January although Sherry Cooper, chief economist at BMO Nesbitt Burns, is forecasting that sales will just break into positive territory for the month with a 0.1 pct rise.
"Consumers kept rolling in January, probably grinding out a decent rise in ex-autos retail sales," Cooper said in a note to clients, adding that this week is likely to "bring more neutral economic news to the table after a run of very strong reports of late."
Economists also expect this week's data to confirm continuing declines in business inventories and industrial production while producer price inflation is anticipated to remain benign.
"We judge that business inventories will fall another 0.8 pct in December, marking the 11th consecutive monthly drop," Lehman Brothers economics team said in a weekly briefing note.
The Lehman economists said that the Commerce Department has already announced that manufacturer's inventories, which make up approximately 40 pct of total business inventories, were down 0.6 pct in December. Following are the consensus forecasts of Wall Street economists for data to be released this week.
JANUARY RETAIL SALES, Wednesday (8.30 am): Economists expect retail sales to fall 0.2 pct in January after sales fell by a smaller-than-expected 0.1 pct in December. Excluding autos, retails sales are forecast to rise 0.2 pct in January after they declined 0.1 pct in December.
DECEMBER BUSINESS INVENTORIES, Thursday (8.30 am): Economists forecast business inventories fell 0.5 pct in December after inventories declined 1.0 pct in November.
A decrease in December inventories would mark the eleventh straight monthly decline in business stocks.
JANUARY IMPORT PRICES, Thursday (8.30 am): Economists said that import prices will be unchanged in January after import prices fell 0.9 pct in December.
The last increase in import prices was in May 2001.
Export prices are forecast to fall 0.2 pct in January following a 0.2 pct drop in December.
WEEKLY JOBLESS CLAIMS, Thursday (8.30 am): Forecasts indicate that initial claims for regular state unemployment benefits fell 16,000 to a seasonally-adjusted 374,000 for the week ended Feb 2 after claims rose 30,000 to 390,000 in the prior week.
JANUARY PRODUCER PRICE INDEX, Friday (8.30 am): Economists said that headline producer prices rose 0.1 pct in January following a 0.7 pct fall in December.
The core PPI rate, which excludes volatile food and energy prices, is forecast to be unchanged in January after it declined 0.1 pct in the prior month.
JANUARY INDUSTRIAL PRODUCTION, Friday (9.15 am): Economists expect industrial output to fall 0.1 pct in January after production declined 0.1 pct in December
A decline in January output would mark the sixth straight monthly fall in output. Since Sept 2000, industrial production has registered only one positive month of growth.
January capacity utilisation is forecast at 74.3 pct.
UNIVERSITY OF MICHIGAN INITIAL FEBRUARY CONSUMER SENTIMENT INDEX,
Friday (10.00 am): Economists forecast that the University of Michigan's initial February consumer sentiment index will rise slightly on the month to 94.0 after it declined to 93.0 in the final January reading.