Cash-for-clunkers to boost July retail sales

WASHINGTON (Reuters) - A jump in new-car sales fueled by the "cash-for-clunkers" trade-in program likely powered U.S. retail sales to a third straight monthly gain in July, according to a Reuters survey of 74 economists.

It would mark the first three-month string of sales rises in more than a year and help underpin optimism that recession is likely to end in the current quarter, as forecast on Monday by a huge majority of Blue Chip private-sector economists.

The Reuters survey estimates that July retail sales, to be published on Thursday, climbed a relatively sturdy 0.7 percent after gains of 0.6 percent in June and 0.5 percent in May.

Car dealers estimate that the Obama administration's program offering incentives for consumers who trade in gas-guzzling old cars for more efficient new ones had spurred more than 245,000 new-car sales by last Friday by offering some $1 billion of rebates.

While it was unclear how enduring the rise in broader retail sales would prove to be, analysts said there was no doubt the car trade-in incentives were working.

"With weak labor markets still casting a pall over household outlays broadly, consumers were content to drive their new vehicles hungry and naked, paring back all other purchases to assist with financing," BMO Capital Markets wrote in its weekly outlook.

Excluding auto sales, retail purchases will rise at a slower pace for a third month in a row, up 0.1 percent after rises of 0.3 percent in June and 0.4 percent in May, drawing into question how broad-based any recovery is likely to be.

A sustained pickup in spending is vital for fueling a broader U.S. recovery since purchases of goods and services account for about two-thirds of the economy.

The Commerce Department will release its retail sales report at 8:30 a.m. EDT on Thursday, August 13.

The following is a selection of comments from economists:

MOODY'S ECONOMY.COM

Forecast: retail sales: +0.3 percent

ex-autos: -0.3 percent

"Outside of autos, consumption is very weak, and there is little reason to expect any measurable improvement, as household finances are stretched thin and unemployment is rising. Prices at the pump fell in July, which will be a drag on nominal spending at gasoline stations."

MORGAN STANLEY & CO. INC

Forecast: retail sales: +1.8 percent

ex-autos: +0.1 percent

"The spike in vehicle sales tied to the cash-for-clunkers program should more than offset a modest price-related pullback in the gas station component resulting in a sharp rise in headline retail sales for the month of July. The chain store results pointed to some softness in the general merchandise category on a monthly sequential basis although there is considerable uncertainty tied to this sector now that Wal-Mart no longer reports. Also company reports suggest that the restaurant sector was weak again in July. On the bright side, apparel outlets should show a pickup."

WELLS FARGO SECURITIES

Forecast: retail sales: +0.8 percent

ex-autos: +0.3 percent

"The spike in motor vehicle sales will likely be unsustainable once the (cash for clunkers) program expires, which means we could see the gains retraced in coming months. Department and luxury stores continue to be hardest hit as consumers remain cost conscious. We expect consumers will continue to prioritize spending toward essential items until the labor market begins to improve."

(Polling by Bangalore Polling Unit)

(Reporting by Nancy Waitz; Editing by Andrea Ricci)