With the back-to-school season at hand, many families are preparing children for class. Gone are the days when such shopping expeditions were limited to a pair of shoes, pencils, paper and rulers. Parents now include smartphones and computers in their spending plans. The rising costs include college tuition. That, coupled with the continuing ripple effects of the recession, such as low wage growth, poses big challenges.
In terms of economic reports this week, here's what we'll be looking at:
- The Commerce Department reports on retail sales for July: Tuesday at 8:30 a.m. (all times Eastern)
- The Labor Department reports on the producer price index for July: Wednesday at 8:30 a.m.
- The Labor Department reports on the consumer price index for July: Thursday at 8:30 a.m.
- The Commerce Department reports on housing starts for July: Friday at 8:30 a.m.
Consumers downgrade spending plans
The retail trade considers the school-shopping period second only to the Christmas season in traffic and sales. That's according to the main industry trade group, the National Retail Federation. It estimates that the average family spending for both school and college will spend $634 this year, down 8 percent from last year. Kathy Grannis, a spokeswoman for group, says, "There are plenty of families out there looking to cut corners where they can." Grannis cautions against linking the strength of the school shopping season to the outlook for the holiday season.
As for the government's monthly retail sales report, economist Jeffrey Rosen with Briefing.com is downbeat. He traces the problem back to lackluster jobs reports. Says Rosen: "A disappointing employment report showcased a sharp decline in aggregate wages. Without wage growth, consumption gains will be reliant upon spending out of savings. Unfortunately, we believe that is unlikely to happen. Toss in a decline in motor vehicle demand and the underlying trends for July retail sales look weak."
How's new-home construction?
Mortgage interest rates have been bouncing around lately. They spiked in June, but have come back down. Bankrate's national survey finds that 30-year fixed mortgages stood at 4.56 percent last week.
Both the level and direction of interest rates are watched closely for their effects on home sales and building. On new-home construction, economist David Crowe says. "We had a little slump in the second quarter, maybe due to some unusually wet weather in the South." Crowe, chief economist with the National Association of Home Builders, says housing starts "continued to advance, but at a little slower pace" than he expected. He doesn't believe the shift was due to the rise in interest rates.
Crowe expects to see double-digit gains for new construction both this year and next. Still, he has recently downgraded his forecast for this year.
Longer term, Rosen at Briefing.com says builders will need to continue to ramp up just to meet demand. "Low supply of single-home residences will keep upward pressure on home builders to increase production," he says.
And what about prices?
Two of this week's reports involve closely watched inflation measures. There has been some volatility in key gauges of prices at the retail and wholesale levels. But analysts expect both the core rates of the CPI and PPI will confirm the Federal Reserve's view that inflation remains low.
Just checking gasoline prices, auto club AAA indicates that a gallon of regular gas was averaging about $3.58, which is up from a month ago, but lower than a year earlier.
This week in business history: 'Fab Four' plays Shea
The beginning of the era of stadium rock came with the song "Twist and Shout." It was performed by the Beatles at Shea Stadium Aug. 15, 1965. It was the first stop on their U.S. tour, reportedly grossing $300,000. This summer, some top acts are enjoying more than $1 million in ticket sales for one concert alone.
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