Retail Sales, Producer Prices Expected to Rise

Reports this week on consumer spending and inflation could provide the Federal Reserve with the final evidence it needs in deciding whether to raise interest rates. The central bank’s policy panel, the Federal Open Market Committee, raised the federal funds rate on overnight loans between banks a quarter percentage point to 5% on June 30 to guard against the potential risk of higher prices. The FOMC next meets Aug. 24.

A Commerce Department report coming Thursday on retail sales is expected to show a rise of 0.3% in July following a 0.1% increase in June. Outside of autos, sales probably rose 0.4% in July, the same as June. The producer price index, coming Friday, meanwhile, probably rose 0.3% in July, reflecting higher energy costs, after falling 0.1% in June. Outside of food and energy, the PPI probably increased 0.1% in July after dropping 0.2% in June. The import price index is also expected to register an increase for the month, rising 0.4% in July after dipping 0.2% in June, analysts said. That report from the Labor Department is due Thursday.

The Fed itself will shed some light on the situation Wednesday when it releases its latest “beige book” report on the U.S. economy, based on reporting of the Fed’s 12 district banks that will help form the basis of discussion at the next FOMC session.

In other reports this week, the Commerce Department is expected to report today that inventories at the nation’s wholesalers increased 0.3% in June, the same as May, while total inventories--a separate report due out Friday--also showed a gain of 0.3% in June, the same as May.