By Mark Felsenthal /1 hour, 50 minutes ago/
WASHINGTON (Reuters) - Retail sales edged up in August but they posted
the biggest decline in almost a year when car sales were stripped out as
consumer spending softened, a government report on Friday showed.
Retail sales rose a smaller-than-expected 0.3 percent last a month, the
Commerce Department said. However when motor vehicles and parts were
stripped out, August retail sales fell 0.4 percent, the sharpest drop
since September 2006.
Analysts polled by Reuters were expecting sales to gain 0.4 percent and
to rise 0.2 percent when cars and parts were stripped out.
U.S. Treasury debt prices extended gains, stock futures remained
negative ahead of market opening, and the dollar fell after release of
the data, which suggested consumers may be resting their wallets as a
result of a housing slowdown and financial market turmoil.
The report, along with data last week showing jobs declined in August
for the first time in four years, pointed to softness in the economy.
"If you combine the consumer side of the equation with the employment
side we got a week ago, you now see some chinks in the armor of the
economy," said Kevin Flanagan, a fixed income strategist at Morgan
Stanley in Purchase, New York.
Markets widely expect the Federal Reserve to cut interest rates by at
least a quarter-percentage point when it meets next week to provide a
boost to the economy in what many expect to be a series of interest rate
reductions.
Fed funds rate futures slightly increased chances of a half-percentage
point interest rate cut as opposed to a quarter-point reduction on the
report.
Retail sales excluding cars, parts and gasoline, fell 0.1 percent, the
steepest decline since April, the Commerce Department said.
So-called core retail sales, which exclude cars, gasoline and building
materials, were unchanged from the prior month after an 0.8 percent gain
in July.
Purchases of motor vehicles and parts, which make up around one-fifth of
all sales, rose 2.8 percent.
Meanwhile, sales fell 2.4 percent at gas stations, which economists said
reflected falling prices.
Other retail categories fell as well. Clothing store sales slipped 0.1
percent, building materials and garden supply store sales were down 1.0
percent and department store sales fell 0.2 percent.
Sales at food and beverage stores held steady.
IMPORT PRICES, CURRENT ACCOUNT
Another government report showed that U.S. import prices fell
unexpectedly in August by 0.3 percent, marking the first decline since
the start of the year as petroleum costs also retreated.
Excluding a 1.3 percent drop in imported petroleum prices, import prices
declined 0.1 percent last month, the Labor Department said. It was the
first fall in overall import prices, or in the cost of imported
petroleum, since January.
Analysts polled by Reuters had forecast a 0.3 percent rise in import
prices in August. Export prices increased 0.2 percent, matching
expectations.
Meanwhile, a separate Commerce Department report showed the U.S. current
account deficit narrowed in the second quarter to $190.8 billion,
roughly in line with expectations, from an upwardly revised gap of
$197.1 billion in the first quarter, the Commerce Department said on Friday
The government had previously estimated the first quarter current
account deficit at $192.6 billion.
Analysts were expecting the current account gap to narrow to $190 billion.
The current account, the broadest measure of U.S. trade with the rest of
the world, includes goods, services and income flows.
The second-quarter current account deficit equaled 5.5 percent of gross
domestic product, down from 5.8 percent in the first quarter, the
Commerce Department
said.
