US retail sales surge 2.7% in August - Energy prices lift producer price index, while inventories fal

US retail sales surge 2.7% in August - Energy prices lift producer price index, while inventories fal
By Alan Rappeport in New York
Copyright The Financial Times Limited 2009
Published: September 15 2009 14:25 | Last updated: September 15 2009 15:49
http://www.ft.com/cms/s/0/1700ed54-a1ed-11de-81a6-00144feabdc0.html


US retail sales climbed at the fastest rate in more than three years last month as the popular “cash for clunkers” car rebate programme succeeded in spurring a broader revival in consumer demand, official figures showed on Tuesday.

The swelling cost of energy also inflated wholesale prices in August. A separate report from the labour department revealed that the producer price index rose 1.7 per cent on a summer surge in petrol prices.

Sales jumped 2.7 per cent in August from the previous month and were off 5.7 per cent from a year earlier, commerce department figures showed on Tuesday. The results beat analysts’ expectations and marked a turnround from a July sales dip, fuelled by a 10.6 per cent rise in sales at car and parts dealers thanks to the now-defunct rebate scheme.

Excluding sales of cars and parts, which are considered volatile, retail sales were up 1.1 per cent in August. Petrol stations’ sales jumped 5.1 per cent as the price of oil rose during the month.

But the rise in retail sales was widespread last month as US consumers bought more clothing, sporting goods, books, electronics and food. Only building materials and supplies dipped in August sales.

Alan Ruskin, a strategist at RBS Greenwich capital, called the result “the first sign of the much vaunted US consumer again finding their voice”.

Analysts have been anxious to see if government stimulus measures would succeed at kickstarting consumer spending and some have expressed fear that consumers were “borrowing from tomorrow” by taking advantage of subsidies and deep discounts. Rising prices could also present a potential obstacle to cautious consumers.

“The income and credit constraints on consumers remain intense,” said Ian Sheperdson, chief US economist at High Frequency Economics.

Economists at IHS Global Insight predict that consumer spending will rise 2.5 per cent in the third quarter after falling 1 per cent in the second three months of the year.

Meanwhile, wholesale prices rose 1.7 per cent in August after falling 0.9 per cent in July and are down 4.3 per cent from a year ago. The rise was greater than analysts expected and was led by an 8 per cent rise in energy prices and a 23 per cent jump in the cost of petrol.

Core producer prices, excluding food and energy, rose 0.2 per cent in August but are off 2.3 per cent year on year.

“With gold at $1,000 an ounce, we are concerned about the outlook for inflation later in 2010 and this report suggests that inflation pressures may be beginning to stir in manufacturing,” said John Ryding and Conrad DeQuadros, economists at RDQ Economics.

Hopes of manufacturers could be lifted by a July decline in business inventories of 1 per cent, which was matched by a 1 per cent increase in sales, signalling that a ramp up in production could be in store.

Companies have been working to clear their stocks in the past year to cope with weak demand, and business inventories, which are off 17.8 per cent from a year ago, have fallen to their lowest level since March 2006.

“While overall business inventories are likely to continue to decline in the months ahead, the rate of liquidation is likely to moderate significantly,” said Joshua Shapiro, chief US economist at MFR.