Jun 8, 2008

Retail Sales Probably Increased in May: U.S. Economy PreviewBy Bob WillisBloomberg.com

Bloomberg — Sales at U.S. retailers probably rose in May as Americans started spending tax rebate checks and record gas prices inflated service-station receipts, economists said before reports this week.

Purchases rose 0.5 percent following a 0.2 percent drop the prior month, according to the median estimate in a Bloomberg survey before the Commerce Department’s report on June 12. Other reports may show rising food and fuel prices pushed up the cost of living and the housing slump showed no sign of abating.

Retailers have started benefiting from about $57 billion in tax-rebate checks the government has sent out so far in a bid to revive the economy. Still, the improvement may be short-lived as tighter credit, plummeting property values and a weakening labor market signal consumers will retrench.

“It’s temporary good news,” said Jonathan Basile, an economist at Credit Suisse Holdings Inc. in New York. “It’s tax- rebate induced and that is a transitory stimulus. There is a laundry list of factors working against the consumer right now.”

Retail sales excluding automobiles increased 0.7 percent last month after a 0.5 percent rise in April, according to the Bloomberg survey median. More spending at service stations, reflecting the jump in gasoline prices, probably boosted the figure, economists said.

The cost of gasoline has risen 31 percent so far this year, reaching a record $3.99 a gallon last week for regular unleaded, according to AAA. Food prices are also surging, prompting shoppers to frequent discount stores searching for bargains.

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