Street expects gloomy retail, inventories data

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(Agencies)
Updated: 2008-12-12 14:59

WASHINGTON -- The government is expected to provide fresh evidence Friday that retailers are taking a hit as consumers continue to pull back amid what appears to be a deepening recession.

In this Dec. 5, 2008 file photo, a rack with forms to assist the unemployed and job seekers is seen at a New York State Department of Labor career center in Albany, N.Y. The government is expected to provide fresh evidence Friday that retailers are taking a hit as consumers continue to pull back amid what appears to be a deepening recession. [Agencies]

Wall Street economists expect retail sales in November fell 1.9 percent, according to a survey by Thomson Reuters.

That would be an improvement over October's record 2.8 percent drop, but still the fifth straight monthly decline reported by the Commerce Department.

The report comes a day after the Labor Department said initial jobless claims rose to the highest level in 26 years, though the work force has grown by about half over that time.

The jobless claims and retail reports illustrate the negative cycle currently bedeviling the economy: consumers tighten their belts as the unemployed, and those who fear for their jobs, spend less, reducing retail sales and leading companies to cut back further.

Most Americans expect the jobs situation to get even worse, according to a poll released Thursday by the Pew Research Center for the People & the Press. More than 60 percent believe unemployment will increase next year, and 73 percent plan to cut back on holiday gifts this year.

Economists anticipate more gloomy data Friday. The Commerce Department is expected to report that business inventories fell by 0.2 percent in October, which would be the second straight monthly decline.

Businesses cut back on their inventories by that amount in September, the first decline since March 2007, and the biggest setback in more than three years. Inventories are closely watched signals of business confidence. When companies are reducing their stockpiles because they are worried about future sales, it can further depress overall economic growth.

And Wall Street economists expect the Labor Department to report that producer prices fell 2 percent in November. That would be the fourth consecutive drop and could fan fears about a deflationary spiral, where the economy shrinks as consumers remain on the sidelines waiting for prices to fall further.

If those predictions prove accurate, they will follow jobless claims data that were worse than already downbeat projections. Initial applications for unemployment benefits rose to a seasonally adjusted 573,000, the Labor Department said Thursday. That was nearly 50,000 more than economists were expecting and up from a revised 515,000 the week before.

Adding more damage to the already ravaged labor market, Bank of America said it expected to cut as many as 35,000 jobs over the next three years, including some from investment bank Merrill Lynch, which it agreed to buy in September.

Separately, the US trade deficit rose unexpectedly in October to $57.2 billion, partly because of dampened demand for American exports. Analysts had been expecting a decline because of falling oil prices.

The numbers came before the Senate rejected the $14 billion auto-industry bailout bill late Thursday after the United Auto Workers refused to accept Republican demands for swift wage cuts.

Senate Majority Leader Harry Reid said he hoped President George W. Bush would tap the $700 billion Wall Street bailout fund for emergency aid to the automakers. The White House said it was evaluating its options.

News of the Senate vote sent Asian stock markets tumbling overnight. Japan's Nikkei index was down about 5 percent, while Hong Kong's Hang Seng shed nearly 7 percent.

General Motors Corp. and Chrysler LLC executives have said they could run out of cash within weeks without government help. Ford Motor Co., which would also be eligible for federal aid under the bill, has said it has enough cash to make it through 2009.

Besides Bank of America's announcement, more layoffs in other industries were announced Thursday. Tool maker Stanley Works said it plans to cut 2,000 jobs and close three manufacturing facilities.

Sara Lee Corp., known for food brands such as Jimmy Dean and Hillshire Farm, said it will cut 700 jobs as it outsources parts of its business.

As a proportion of the work force, the number of people continuing to receive benefits is the highest since August 1992, when the US was recovering from a relatively mild recession.