The two reports on Wednesday could deepen concerns at the
Federal Reserve over the readiness of the U.S. economy to absorb a
hike in interest rates that many policymakers have said would likely come
around the middle of next year. Retail sales, which account for about one-third
of consumer spending, dropped 0.3 percent last month after a 0.6 percent gain
in August, the Commerce Department said. It was the first decrease since
Economists had expected a decline given a slower pace of
sales reported by automakers and a drop in gasoline prices that would have cut
into receipts at service stations. But what came as a surprise was that the
weakness was so broad-based. A gauge of so-called core sales, which strips out
automobiles, gasoline, building materials and food services, and corresponds
most closely with the consumer spending component of gross domestic product,
fell 0.2 percent. Economists polled by Reuters had expected it to rise.
Prices for U.S. stocks dropped about 1 percent and yields on
U.S. government debt fell sharply. The United States had looked like a bright
spot in a slowing global economy, but Wednesday's data took away some of
Sales at clothing retailers dropped 1.2 percent and receipts
at sporting goods shops edged 0.1 percent lower. Overall sales would have
fallen further but for the release of a new version of Apple's flagship
cellular phone, which helped sales at electronics and appliance stores rise 3.4
Separately, the Labor Department said prices received by
U.S. producers fell 0.1 percent in September, the first decline in over a year.
While many indicators have pointed to a strengthening U.S.
economy, policymakers at the Federal Reserve are concerned that inflation has
been stuck below their 2 percent target. The Fed targets inflation felt by
consumers, but the producer price report can point to inflation pressures down
the road. And Wednesday's report suggests these are generally lacking.
Producer prices rose 1.6 percent in the year through
September, the lowest annual reading in six months and down two tenths from
August's print. A third report showed U.S. business inventories in August
posted their smallest gain since June 2013.
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