U.S. Retail and Manufacturing Down

CBJ — U.S. retail sales fell more than expected in August amid weak purchases of automobiles and a range of other goods, pointing to cooling domestic demand that further diminishes expectations of a Federal Reserve interest rate increase next week.

Other data released by the Department of Labor showed the American market continuing to tighten with layoffs remaining very low last week, and underlying producer inflation creeping up in August.

Coming on the heels of reports showing a slump in manufacturing activity in August and a slowdown in job growth, the retail sales data could temper hopes of a strong rebound in economic growth in the third quarter.

The U.S. Commerce Department said retail sales declined 0.3% after edging up 0.1% in July. Sales were up 1.9% from a year ago. Excluding automobiles, gasoline, building materials and food services, retail sales slipped 0.1% last month after a similar drop in July.

These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.

Economists had forecast overall retail sales slipping 0.1% and core sales climbing 0.3% last month.

The weak report could encourage the Fed to keep interest rates unchanged at its Sept. 20-21 policy meeting.  The U.S. central bank raised its benchmark overnight interest rate at the end of last year for the first time in nearly a decade, but has held it steady since amid concerns over persistently low inflation.