Spending by U.S. consumers may have fallen in June for the first time in more than a year as auto sales declined and growth in incomes slowed, according to economists surveyed in advance of today's government report. The Commerce Department is likely to say that personal consumption expenditures fell 0.1 percent during the month after rising 1 percent in May, based on the median of 60 forecasts in a survey by Bloomberg News. Incomes probably grew 0.3 percent, the least since April 2003, after rising 0.6 percent. The report is scheduled for 8:30 a.m. in Washington.
The slowest pace of car sales in almost six years contributed to the biggest drop in retail receipts since February 2003 during June, according to government data. Income growth slowed as the number of jobs added in June fell to less than half the increase in the prior month. A rebound in hiring may fuel income and spending in the rest of 2004, economists said. Spending in June was restrained by ``a combination of exhaustion after a yearlong rebound and short-term headwinds, such as price spikes in gasoline and other consumer items,'' said Robert DiClemente, chief U.S. economist at Citigroup Global Markets Inc. in New York. ``Indications regarding chain-store and auto sales suggest that consumer spending is already reviving.''
Consumer spending, which accounts for more than two-thirds of the U.S. economy, hasn't fallen since April 2003. Spending increased in the second quarter at the weakest pace in three years, the Commerce Department said Friday in an advance report. The slowdown was a drag on economic growth during the period. Gross domestic product expanded at a 3 percent annual rate, compared with 4.5 percent in the first three months of the year.
Auto Sales
Some 15.4 million automobiles were sold at an annual pace in June, the lowest total since August 1998 and down from a 17.8 million pace in May, according to Autodata Corp. Vehicle sales are forecast to rebound to a 16.8 million rate in July, according to a separate Bloomberg survey. General Motors Corp., the world's largest carmaker, may miss a 2004 profit target, analysts at Goldman, Sachs & Co. and Lehman Brothers said. They cited the need for General Motors to boost rebates and cut production to trim a backlog of vehicles. U.S. retail sales, a component of retail spending, fell 1.1 percent in June, the biggest drop since February of last year, the Commerce Department said last month. Gasoline prices that held near May's record of $2.10 a gallon left consumers with less to spend on other goods and services, hurting sales at department stores such as Dallas-based J.C. Penney Co.
Energy Prices
Federal reserve Chairman Alan Greenspan told the Senate Banking Committee on July 20 that the surge in energy prices may not have a lasting effect on consumer spending. ``Those higher prices, by eroding households' disposable income, have accounted for at least some of the observed softness in consumer spending of late, a softness which should prove short- lived,'' Greenspan said. The economy is expected to grow 4.5 percent this year, the fastest rate since 1999, according to the median estimate of economists surveyed by Bloomberg from June 25 to July 6. Still, prices of crude oil rose to a record last week on concern that supplies would be inadequate in the face of rising demand. ``There's been a dramatic withdrawal of cash from consumers over the past few months'' because of high energy prices, William Zadrozny, chief executive officer of Siemens Financial Services, the Iselin, New Jersey, lending unit of Siemens AG, said in an interview last week. ``If oil prices get under control, we're going to see a very optimistic outlook going into 2005.''
Employment
More people need to have jobs for consumer spending to improve, according to economists. July payrolls may have risen to 241,000 from 112,00 in June, according to the median estimate of economists surveyed by Bloomberg News. The Labor Department reports Friday on payrolls. The prospect of a rebound in job growth has buoyed consumer optimism, which economists said may herald increased spending. U.S. consumer sentiment improved for a second straight month in July, a survey by the University of Michigan found.
``Confidence surveys suggest that the slowdown in consumer spending may prove temporary,'' Bill Dudley, chief U.S. economist at Goldman, Sachs in New York, said. A Bloomberg survey of economists showed that U.S auto sales probably rebounded in July, as General Motors and Ford Motor Co. offered discounts to clear dealer lots before new models are introduced. Vehicles probably sold at an annual rate of 16.8 million vehicles, according to the median forecast. Home Depot Inc., the world's largest chain of home- improvement stores, will open two support centers in Texas and employ 850 people to improve inventory management and order fulfillment. Home Depot is based in Atlanta. ///www.bloomberg.com