RETAIL SALES
Summer blues
Retailers have been counting on a resurgence in denim sales to provide a boost to late summer spending, but so far the campaign shows promise of giving store owners the blues.
Although plenty of Americans wore sloppy jeans through the ’70s and ’80s, it seems that not many recall the clothing of that era with much nostalgia. Huge discount and department store chains reportedly have begun severely marking down prices on such retro denim apparel.
The question for the economy, of course, is whether such a lack of buying fervor provides an indicator that consumers are starting to show signs of fatigue.
Watch Tuesday’s report on July retail sales: Economist Sung Won Sohn is looking for a decline of 0.3 percent, although most of the blame will go to weak car sales. Without that factor, sales would be up 0.2 percent.
“Except for a slowdown in auto sales, the retail figures appear to be quite stable,” said Sohn, of Wells Fargo & Co. in Minneapolis. “Back-to-school sales are going well, and retail activity could accelerate because Americans are beginning to receive their tax rebates.”
He said store managers are trying to jump-start activity by telling consumers that they can leverage the rebates to make larger purchases, using their anticipated tax savings of about $50 a month.
As for car dealerships, Sohn said they are having difficulty because “consumers aren’t responding very well to promotions and rebates. Americans simply consider such activities to be normal for the industry.”
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HOUSING STARTS
Pillar of growth
Despite dour reports from other sectors of the economy, home construction refuses to buckle. Expect continued evidence of strength in Thursday’s July housing starts. Economist Lynn Reaser expects a very slight drop, to an annual rate of nearly 1.63 million units, from 1.66 million in June.
“Housing remains a pillar of strength in the economy,” said Reaser, of Banc of America Capital Markets in St. Louis. “It’s about the only area where there is no talk of doom and gloom.”
She said Americans are confident that they can achieve further price appreciation from their homes, so they are willing to pay for bigger, more comfortable places to live.
“Mortgage rates are low, many people remain untouched by corporate layoffs, and housing is seen as a good investment,” she said. “Construction remains about 100,000 units ahead of the pace for the second half of last year.”
TRADE DEFICIT
Dollar alert
With barely over a week before the Federal Reserve’s next policy meeting, get ready for a summer stewpot of economic numbers from which policymakers can sample. Included are July business inventories Wednesday; the month’s industrial production and capacity utilization, also Wednesday; the July consumer price index Thursday and the June trade deficit Friday.
Of the group, watch Friday’s number. Globally, there is a near-universal desire to see some weakening of the dollar. Any bad news about trade might provide an excuse for traders to unload the greenback.
EQUITIES
Autumn fallout
A glum mood pemeates the stock market amid the realization that this year’s corporate profits will fail to exceed last year’s, for the first time since 1991.
Sullen investors are deciding the earnings outlook won’t improve before early next year. With such a long time horizon, some are bailing out, unwilling to face the slow torture that often occurs in early autumn.
Economist A. Gary Shilling says for now, “neither the bulls nor the bears are in command.”
Shilling, who heads an investment firm in Springfield, N.J., says the bulls are counting on Fed rate cuts and the tax rebate to stir a market revival. As for the bears, he says they maintain stocks still are overvalued.