U.S. Retail Sales Inch Up; Producer Prices Decline

The softness of September’s retail sales figures supports our view that the Fed probably isn’t going to hike interest rates until early next year.

The U.S. department of commerce said retail sales rose 0.1% last month largely as cheaper petrol weighed on service station receipts.

Third quarter growth in the United States was also revised down to 1.7%.

The economy expanded at a 3.9 percent rate in the second quarter. That’s a decent improvement over the 4.3% year-over-year gain in sales ex-gas in August.

“There might be a few chinks in the armor”, Millan Mulraine, TD Securities LLC deputy chief of research and strategy, told Bloomberg.

The Fed’s report echoes other recent data that suggests the US economy, while still expanding, has run into headwinds from overseas and lost a few momentum. This is a more encouraging number, and would seem to indicate stronger consumer spending activity than the headline number might seem to indicate. The data reveals steady domestic demand that may prevent the economy from contributing to sluggish global growth. Regular gasoline at the pump was about $2.30 a gallon this week, or 50 cents lower than the year’s high in mid-June, according to AAA, the biggest USA auto group. The dollar declined against a basket of currencies. Last year, holiday sales increased 4.1 percent over the previous year. It was the index’s eighth consecutive 12-month decrease.

This increase is higher than the 10-year average of 2.5% per year.

But Fed chair Janet Yellen still seems sure that the US central bank will have to raise rates by the end of the year. Economists had expected a fall of 0.1 per cent excluding cars.

The Commerce Department said on Wednesday the unchanged reading in August’s inventories followed a downward revision to July’s data.

Estimates in the Bloomberg survey for total retail sales ranged from a drop of 0.2 percent to a 0.6 percent gain. NRF said this increase helped quell concerns regarding expected consumer spending growth, but noted that the sequential decline dealt with the aftereffects of warmer than normal weather and a deflationary retail environment. Consumers also boosted spending at sporting goods and hobby stores as well as at restaurants and bars.

Stocks on Wall Street fell after Wal-Mart Stores Inc warned that its full-year sales would be flat because of dollar strength.