Transcripts

Retailers Are On A Roll

PAUL KANGAS: Good news as well from two of the nation's biggest retailers. Wal-Mart and Target posted better-than-expected second quarter profits, but the government reported a smaller- than-expected gain in July retail sales. As Suzanne Pratt reports, the data is changing perceptions about consumer spending.

SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: Even though energy prices are at record highs, Americans have still been engaging in one of their favorite pastimes: shopping. According to fresh government data, retail sales in July gained 0.7 percent. Excluding autos, sales rose only 0.2 of 1 percent. But economists say more important than the July figures was news that June was revised higher, suggesting the economy's so-called soft patch was not as deep as believed. The government now says June retail sales dropped only 0.5 of 1 percent rather than the previously reported decline of more than 1 percent. Ex-autos, retail sales actually gained ground in June. Put the two monthly reports together and economists say there's now better momentum going into the second half.

STEPHEN GALLAGHER, US CHIEF ECONOMIST, SG CIB: What we're seeing is better resiliency. I think it tells us that we're going to get a healthier second half than what we might have been fearing just yesterday or certainly when we had the initial June report.

PRATT: It seems like the nation's largest retailer agrees with that premise. In conjunction with the release of better-than-expected second quarter earnings, Wal-Mart officials said today they were confident that profits would continue to grow this year. Target issued a similar forecast today along with its quarterly results, which were also better than expected. In June, Wal-Mart and other U.S. retailers posted sales that fell short of expectations, prompting concern about the health of the economy. Today, economists said they were pleased by the retailers' cautious optimism.

MICHAEL NIEMIRA, CH. ECONOMIST, INTL. COUNCIL OF SHOPPING CENTERS: The optimism from retailers such as Wal-Mart and Target really echoes the view, the Fed's view that that slowdown that we're seeing is temporary and we're likely to see improvement in the second half. I think that's probably the best view of the second half at this point.

PRATT: Nevertheless, both Wal-Mart and Target also said today they are still concerned about soaring oil prices and the effect they might have on consumer spending. Experts agree, energy costs remain the darkest cloud overhanging the outlook for consumption. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York.