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Economic Watch: Retail Sales Lower, Producer Prices Fall

Retail sales in the U.S. during September stumbled a bit, marking the first month-to-month decline since January, while a separate report shows there is no reason for concern about inflationary pressures.

Evan Lockridge
Evan LockridgeFormer Business Contributing Editor
October 15, 2014
Economic Watch: Retail Sales Lower, Producer Prices Fall

 

3 min to read


Retail sales in the U.S. during September stumbled a bit, marking the first month-to-month decline since January, while a separate report shows there is no reason for concern about inflationary pressures.

Figures released Wednesday by the U.S. Commerce Department show a 0.3% decline in retail sales from August, following an unrevised 0.6% increase in August from July.

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Compared to a year earlier, September sales increased 4.3%.

September’s declines were led by drop in sales of new vehicles and parts, declining 0.8% after a more than 10% surge in August. It was the first decline since January. Sales of gasoline fell 0.8%, due to lower fuel prices, while spending at clothing stories posted a 1.2% drop, its biggest decline in nearly two years.

Excluding sales of autos, overall retail sales fell 0.2% in September from August.

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Sterne Agee Chief Economist Lindsey Piegza said this report is hardly indicative of a strong economy with the Federal Reserve poised to raise interest rates.

“The U.S. consumer has been severely losing momentum since the first quarter, a downward trend that was temporarily suspended with lower gas prices. Looking at this morning's retail sales report, however, against the backdrop of minimal income growth and still-lackluster job creation, that weakening trend appears to have been reignited even with energy price declines continuing,” she said.

“And, given the lingering weakness in consumption and tepid growth overseas, as we have cautioned for months now, the overzealous production of U.S. manufacturers was bound to be halted – that is unless consumption rebounded to the level producers were hoping, which clearly has not come to fruition.”

A separate report from the Labor Department, also released Wednesday, shows prices at the wholesale level fell for the first time in just over a year, indicating inflation pressures remain tame for the U.S. economy.

The 0.1% decline in the Producer Price Index in September from the month before follows it being unchanged in August from July. It was unchanged for September, when the volatile food and energy prices are removed.

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Compared to a year ago, wholesale prices are up 1.6% in September, below the Federal Reserve's inflation target of no more than 2% annually and the lowest annual reading in six months.

The September drop from the month before was led by a 0.7% drop in overall energy prices while gasoline prices declined 2.6%, the largest falloff in 18 months. Prices for food also fell by 0.7%, the largest decline in a year, while meat prices plummeted 4.5%, the largest monthly drop in more than four years.

“This morning's weak PPI report will certainly exacerbate disinflationary fears at the Fed,” said Piegza. “In the end, despite the accelerated expectations for rate increases…it is clear…that the Fed's current forward guidance suggests a ‘gradual’ increase in rates when the time is right for a removal of accommodation, but given the turmoil abroad, and declining inflation as a result of a booming dollar as we continued to see again this morning, ‘liftoff’ may be delayed longer than expected.”

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