Washington, May 14 (Bloomberg) -- U.S. retail sales rose in April at a fifth of the previous month's pace as higher unemployment restrained spending, economists said they expect the government to report today. Sales probably increased 0.4 percent, led by more purchases of new autos after carmakers boosted incentives, a Bloomberg News survey of economists found. Sales jumped 2.1 percent in March when more seasonable weather encouraged shoppers to return to malls and dealer showrooms. Excluding vehicles, sales are projected to rise 0.2 percent after gaining 1.2 percent. The economy lost jobs for a third straight month in April, and the unemployment rate rose to 6 percent, matching the highest in eight years. The lack of jobs may slow increases in wages that are necessary to keep spending from faltering.
``A weak labor market means that consumers are worried about their incomes and spending less,'' said Elisabeth Stoegmueller, an economist at Dresdner Kleinwort Wasserstein in New York. ``The economy isn't quite falling back into recession but is slowing noticeably.'' The Commerce Department will issue the report at 8:30 a.m. Washington time. The projected rise in retail sales is based on the median of 63 forecasts in a Bloomberg survey. Estimates ranged from a decline of 0.4 percent to a gain of 0.9 percent. Also at 8:30 a.m. Washington time, the Labor Department will probably report import prices fell 0.5 percent in April after rising 0.5 percent during March, economists said. Faced with rising unemployment, automakers are propping up sales by sweetening discounts and incentives. General Motors Corp. this month said it will continue to offer five-year, no-interest loans on most models through June 2. The program, which began in April, is more generous than that offered following the terrorist attacks in September 2001. As an alternative to the interest-free loans, customers can take rebates of as much as $3,000.
Auto Sales
Even with the added incentives, sales aren't improving as much as hoped. Automakers sold 16.5 million vehicles at an annual rate in April, short of the 17 million projected by economists and analysts surveyed by Bloomberg News. Sales averaged 16.8 million a month in 2002. ``It's harder to get people in (dealerships) on the deals we can offer them,'' Rick Wagoner, chief executive officer of General Motors, said this month. The world's largest automaker will continue with the loan discounts and rebates even as ``it's getting more expensive and it requires even more creativity,'' he said. Retailers received less of a boost than expected in April from a late Easter holiday. Sales at Wal-Mart Stores Inc., J.C. Penney Co. and other chain stores rose an average of 1.5 percent in March and April, the smallest gain for that period since at least 1986, according to the Bank of Tokyo-Mitsubishi, which tallies results from 78 merchants. Easter fell on April 20 this year and on March 31 last year.
Not `Encouraging'
Spending ``is showing some signs of a little bit of slackening,'' said David Greenlaw, a senior economist at Morgan Stanley in New York. ``The numbers at this point aren't tremendously encouraging.'' The gain in retail sales last month was probably restrained by a drop in receipts at service stations as gasoline prices fell with the lessening of tensions in Iraq, economists said. The average price for gallon of gasoline dropped to $1.63 last month, according to the Department of Energy, from $1.73 in March. Still, the drop in the cost of energy is one of the reasons economists aren't abandoning forecasts of a rebound in spending in the second half of the year. ``Lower energy prices are going to provide consumers with a little more spending power,'' said Stephen Stanley, an economist at RBS Greenwich Capital Markets Inc. in Connecticut. In addition, consumer confidence last month showed the biggest increase in 12 years, the Standard & Poor's 500 Index of stocks is up 18 percent since reaching a five-month low on March 10, and Congress is expected to approve some sort of tax-cut measure this year.
The Optimistic Side
``There are certainly positives to point to,'' Stanley said. ``While the jury is still out, I lean toward the optimistic side.'' The economy is likely to expand at a 3.8 percent annual pace in the last three months of the year compared with a 1.6 percent increase from January to March, according to the median estimate of economists surveyed by Bloomberg News last week. First-quarter growth was hamstrung by a 1.4 percent annual gain consumer spending, which accounts for more than two-thirds of the economy. The increase hadn't been smaller since the first quarter of 1993.//www.bloomberg.com