Retail sales shrink more than forecast

It was the first decline in retail sales since March.

Based on Investing’s Fed Rate Monitor Tool, the markets are pricing in on a measly 9% prospect of a September rate hike, slashed off the previous 15% before USA retail sales data was reported today.

Core retail sales, which excludes automobile saless, unexpectedly fell by a seasonally adjusted 0.1% in August, compared to forecasts for an advance of 0.2%.

Retail trade sales fell 0.5% from July but rose 1.4% from previous year.

The Federal Reserve said Thursday factory production dropped 0.4 percent in August, after an increase of 0.4 percent in July. But sales growth slowed from July’s annual increase of 2.4%. Consumer spending accounts for as much as 70% of US economic growth. Even without the volatile motor vehicle and parts sector stripped out, retail sales were down 0.1%.

While Fed officials remain split on urgency for increasing borrowing costs, the majority of investors as well as economists expect the bank to hold the rates where they are. Higher earnings is one factor that had supported strong spending for most of this year. “In our view, the labor market is tight”, said John Ryding, chief economist at RDQ Economics in New York.A fourth report from the Labor Department suggested the strong dollar and cheap oil’s dampening effects on producer inflation were ebbing. “But budget-conscious households appear content to balance their spending habits with a greater commitment to their long-term financial health”.

USA retailers saw their sales drop more than had been forecast during August, indicating there was a pause in recent strength in consumer spending that was carrying the world’s largest economy.

Sales at gasoline stations continued to decline, falling 0.8% during the month and 9.5% from a year ago.

Meanwhile, U.S. stock futures moved higher ahead of the market open.

Consumers have tended to spend much of their savings at the pump since prices started to tumble. That’s a good thing for consumers, though, giving them more cash to spend on other goods and services. Auto sales were up 1.4% from a year earlier. Sales at nonstore retailers fell 0.3% from July, but increased 10.9% year-over-year. Food prices at the wholesale level fell 1.6 percent in August, the largest drop since a similar decline in April 2013.