Ahead Of The Bell: US Retail Sales

WASHINGTON (AP) â¿¿ U.S. retailers likely saw higher sales in July, a welcome change after three months of declines and evidence that consumers are spending a bit more.

Economists forecast that retail sales rose 0.3 percent last month, according to a survey by FactSet. The Commerce Department will release the report at 8:30 a.m. Eastern Tuesday.

The retail sales report is the government's first look each month at consumer spending, which drives roughly 70 percent of economic activity.

Retail sales fell 0.5 percent in June, the third straight decline. It was the first three-month drop in retail sales since the fall of 2008, when the financial crisis intensified.

The economy has shown some modest improvement since then. Employers added 163,000 jobs in July, the best month for job growth since February. And consumer confidence rose for the first time in five months. The combination could translate into more spending by consumers.

Some of the increase may be because consumers paid more for gas in July than June. The average national price rose 17 cents in July to $3.50 a gallon, according to AAA. Gas prices have continued to rise through August. On Monday, the average national price was $3.70 a gallon.

Gas prices are still lower than their 2012 peak of $3.94 a gallon, reached on April 6.

Despite July's hiring gains, job growth hasn't been enough to push down the unemployment rate. It ticked up to 8.3 percent last month, the same level it was at the beginning of the year. And income has barely increased in the past 12 months, keeping budgets tight for those Americans who have jobs.

Overall, consumer spending on goods and services grew only 1.5 percent in the April-June quarter, the slowest pace in a year.

Americans are also saving more. The savings rate -- the percentage of after-tax income that consumers don't spend -- rose to 4.4 percent in June, the highest in a year.

Early reports from the nation's largest retail chains suggest that things picked up a bit in July.

Target and Gap Inc. both reported better-than-expected sales in July. Discounters also did well. TJX Cos., which operates TJMaxx and Home Goods stores, and Ross Stores Inc. both said sales were ahead of expectations.

On Tuesday, Home Depot posted a 13 percent jump in net income for the quarter and it boosted its outlook for the entire year.

Automakers reported weaker sales in July, but indicated that some of the decline was due to smaller sales to rental car companies. Sales at auto dealerships, which are included in the retail sales report, may still be healthy, economists said.

The economy expanded at an annual rate of 1.5 percent in the April-June quarter, below the first quarter's 2 percent growth and much less than the fourth quarter's 4.1 percent.

Economists expect only slight improvement in growth later this year. Europe's financial crisis has pushed the region to the edge of recession, threatening U.S. exports. And the U.S. economy faces a "fiscal cliff" at the end of this year. That's when several large tax cuts expire and a big spending cut is scheduled to kick in.

Economists warn that if the tax increases and spending cuts aren't delayed or reduced, they could push the economy back into recession.

Copyright 2011 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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