US retail sales point to soft economy

United States consumer confidence ebbed early this month and retail sales advanced just slightly in August, the latest indications of a lack of momentum in the economy, Reuters reported.

The sluggish pace of activity was underscored by another report on Friday showing an energy-led rise in wholesale prices last month, but subdued underlying inflation pressures.

The soft data, however, was unlikely to deter the Federal Reserve from cutting its massive bond-buying program as early as next week, analysts said.

“I don’t think that’s a red flag for the Fed. Overall the data picture is mixed and supports our view that it will be a light taper,” said Thomas Costerg, a US economist at Standard Chartered Bank in New York.

The Thomson Reuters/University of Michigan’s index of consumer sentiment fell 5.3 points to 76.8 in early September, the lowest since April. Economists pointed to worries over high interest rates and a possible US military strike on Syria.

Borrowing costs have risen sharply in recent months in anticipation of the Fed scaling back its monthly bond purchases.

A separate report from the Commerce Department showed retail sales rose 0.2 per cent last month as Americans bought automobiles and other long-lasting goods like furniture and electronics and appliances.

But those purchases appeared to draw spending power away from other areas and receipts for clothing, building materials and sporting goods all fell.

Clothing store receipts dropped by the most in nearly 1-1/2 years, reflecting a slow start to back-to-school sales and offering a cautionary note ahead of the holiday shopping season.

Nevertheless, it was the fifth straight monthly rise in retail sales, which account for about 30 percent of consumer spending. They had gained 0.4 per cent in July and economists polled had expected them to rise 0.4 per cent last month.

Stripping out automobiles, gasoline and building materials, so-called core sales were up 0.2 per cent after rising 0.5 per cent in July. Core sales correspond most closely with the consumer spending component of gross domestic product.

Though core sales slowed a bit from July, they matched the second quarter’s 0.2 per cent average monthly gain.

Avery Shenfeld, an economist at CIBC World Markets in Toronto, said it appeared consumer spending was running close to the 1.8 per cent annual rate it logged in the second quarter.

US stocks were higher, while prices for US Treasury debt also rose. The dollar was flat against a basket of currencies.

In a third report, the Labor Department said the producer price index increased 0.3 per cent last month after being flat in July.

In the 12 months through August, prices received by the nation’s farms, factories and refineries were up 1.4 per cent after advancing 2.1 per cent in the period through July. August’s increase was the smallest since April.

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