WASHINGTON (AFX) - US economic indicators to be released this week are expected to show that consumers increased their spending during July as favourable financing deals tempted them back into the nation's car showrooms and malls, economists said. They stressed that tomorrow's meeting of the Federal Open Market Committee, which is forecast to keep short-term interest rates on hold, is likely to overshadow much of this week's economic data. However, several significant reports, notably July retail sales, are expected to stimulate market interest. "I think the retail sales report will be the focus of attention. If we get the type of numbers I am looking for, the conclusion that you draw is that consumers are not retrenching," Mike Moran, chief US economist at Daiwa Securities America in New York, told AFX News. Moran believes consumer spending is likely to be slower than it has been in recent years, but he said consumers are still lending their considerable support to the economy. The Daiwa Securities economist said auto sales during July will provide robust support to headline retail sales. "I think the auto component should have a sharp impact, we had a 9.0 percent increase in auto sales by manufacturers data, now you should dampen that translating this to retail sales, but we just had a very good month for car sales," Moran stressed. Auto sales rose a larger-than-forecast seasonally-adjusted annual rate of 18.1 mln domestic and imported vehicles in July, up from 16.8 mln units in the same month a year ago, according to Autodata Corp. Auto sales also rose above the 16.5 mln unit pace set in June as freshly implemented zero percent financing deals helped lure consumers back into car and light-truck showrooms. Economists say it is vital for an economic recovery that retail sales remain robust as, aside from the housing market, consumer spending which accounts for some two-thirds of GDP growth is one of the key pillars that continues to support the economy. All 12 Wall Street economists surveyed by AFX News for this week's outlook expect retail sales to be stronger in July than the previous month. With this in mind, economists said they will also be focusing on the University of Michigan's consumer sentiment index reading for August. Brian Fabbri, chief US economist at Paribas Capital Markets in New York, said "the most forward thing for the market to consider is the Michigan survey." He said retail sales, with the large auto sales boost, is not likely to prove too much of a surprise to the markets and that its impact may have already been priced in to people's expectations. "Even though it's (the consumer sentiment survey) not normally as important as things like CPI or (industrial) production or even retail sales, but in this case we are looking for a turn there," said Fabbri who is looking for a slight rise in consumer sentiment. He believes that consumer confidence could receive a further boost if the recent upward movement in stock prices holds firm through this week and tomorrow's Fed meeting. The Dow Jones Industrial Average was up about 5 pct on the week late Friday afternoon. Other economists agreed that the Fed meeting and retail sales are likely to overshadow much of this week's data, but that the markets will be likely watching the weekly jobless claims numbers which are expected to remain relatively steady. "Initial jobless claims have been trending down, we can't claim their down to 300,000 a week, but somehow the thought that consumers have just dried up and gone away, that their all scared, is more of a Wall Street centric view," said Michael Swanson, chief US economist at Wells Fargo & Co in Minneapolis. Swanson also noted that July's strong auto sales are likely to have benefited industrial production during the month. "The nice thing about automotives is their broad reach in terms of the inter-related industry linkages, they go back to so many other components," Swanson added. Fresh data on business inventories and the housing market will also be released this week. Housing starts numbers for July are expected to reflect another strong month for the sector as mortgage applications remained high through the month, partly on the back of sustained low interest rates. Following are the consensus forecasts of Wall Street economists for data to be released this week. JULY RETAIL SALES, Tuesday (8.30 am): Economists expect retail sales to rise 1.0 pct in July after sales increased 0.5 pct in June. Excluding autos, retails are forecast to rise 0.2 pct in July following a 0.2 pct increase in the previous months. JUNE BUSINESS INVENTORIES, Wednesday (8.30 am): Economists forecast that business inventories rose 0.1 pct in June after inventories rose 0.2 pct in May. A further rise in inventories would mark the second straight month in which inventories have risen following sixteen straight months in which inventories declined. WEEKLY JOBLESS CLAIMS, Thursday (8.30 am): Forecasts indicate that initial weekly claims for regular state unemployment benefits rose by 400 to a seasonally-adjusted 376,400 for the week ended Aug 10 after claims fell 15,000 to 376,000 in the previous week. JULY INDUSTRIAL OUTPUT, Thursday (9.15 am): Economists say that industrial output remained unchanged in July following a 0.8 pct increase in June. A further rise in output would mark the seventh straight rise in industrial production. Capacity utilisation is seen remaining unchanged at 76.0 pct in July. AUGUST PHILADELPHIA FED BUSINESS SURVEY INDEX, Thursday (12.00 pm): Economists expect the Philadelphia Fed business activity index to fall 5.6 in August after it declined to 6.6 in July. If the index remains above zero, a reading above zero indicates an economic expansion, it will mark the eighth straight month in which the index has been in positive territory. JULY CPI, Friday (8.30 am): Economists forecast that headline consumer price inflation rose 0.2 pct in July after increasing 0.1 pct in June. The core rate, which excludes volatile food and energy prices, is seen rising 0.1 pct following a 0.1 pct rise in June. JULY HOUSING STARTS, Friday (8.30 am): Economists said housing starts are seen falling 0.5 pct in July to a seasonally-adjusted rate of 1.663 mln units after they fell 3.6 pct in June to 1.672 mln units. UNIVERSITY OF MICHIGAN'S CONSUMER SENTIMENT INDEX FOR AUGUST, Friday (10.00 am): The University of Michigan's index of consumer sentiment is forecast to post an unchanged reading of 88.1 in its reading for August compared with July.