Ahead of the Bell: US retail sales

US retail sales likely grew at strong pace in June, potentially boosting 2Q growth outlook

Associated Press
US retail sales tick up 0.2 percent in June

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In this photo taken May 14, 2014, Jody Dickman, of Pittsburgh, shops at a Gap store in Pittsburgh. The Commerce Department releases retail sales data for June on Tuesday, July 15, 2014. (AP Photo/Gene J. Puskar)

WASHINGTON (AP) -- The Commerce Department releases rPiletail sales data for June. The report will come out at 8:30 a.m. EDT Tuesday.

SALES REBOUND?: Economists forecast that retail sales rose 0.6 percent in June, according to a survey by the data firm FactSet.

That would be the biggest gain since a 1.5 percent surge in March, which came after two months of freezing weather that held back spending.

HEALTHY SALES NEEDED: Retail sales were modest in April and May, raising concerns that the overall economy may not have bounced back in the April-June quarter as strongly as many economists hoped. The economy shrank 2.9 percent at an annual rate in the first three months of the year, largely because of cold weather.

That's raised the stakes for June's figure: A healthy reading would suggest that consumers are confident enough to spend more and lift growth. Economists track retail sales closely because consumer spending drives 70 percent of economic activity.

Many analysts have cut their forecasts for the second quarter. Economists now expect growth of 3 percent, according to a survey released Friday by the National Association for Business Economics. That's down from a forecast of 3.5 percent a month earlier.

A big reason for the lower forecast is weaker consumer spending: Economists expect it will grow at just a 2.3 percent pace in the April-June quarter, down from their June forecast of 2.9 percent.

Spending rose just 1 percent in the first quarter, the smallest increase in four years, a sign consumers are still reluctant to spend freely.

CONSUMERS HARD TO READ: There have been mixed signals recently about Americans' willingness to spend.

Auto sales grew at the fastest pace in eight years in June, evidence that consumers are willing to purchase big-ticket items.

At the same time, several retailers have reported disappointing sales in the past month. Family Dollar, the Container Store and the Gap have all blamed falling sales on consumer caution. The CEO of the Container Store said the chain has been hurt by a "retail funk."

Yet some other stores reported healthy sales gains, including the discount club chain Costco and grocery chain Kroger's.

Purchases of large items like autos may be leaving many Americans with less money to spend on discretionary items like clothes and electronics. Rising grocery prices have likely also squeezed household budgets.

Still, employers are hiring at a healthy pace, which may give Americans more confidence to spend. Employers have added an average of 230,000 jobs a month in the first half of this year, up from 194,000 a month in 2013. That's knocked the unemployment rate down to 6.1 percent, the lowest in nearly six years.

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