WASHINGTON: USretail sales fell for the first time in seven months in September, suggestingthat manufacturing-led weakness could be spreading to the broader economy,keeping the door open for the Federal Reserve to cut interest rates again laterthis month. Consumers tightened their purse strings unexpectedly last month,breaking a seven-month winning streak, government data showed yesterday.Shoppers took home fewer autos and spent less on gasoline, groceries andbuilding supplies while buying less online as well, according to the CommerceDepartment.
The Septemberslump meant momentum waned at the end of the third quarter and could be aworrying development for the world's largest economy. The American consumer isalmost single-handedly sustaining the US expansion as the economy in the restof the world slows and President Donald Trump's trade wars eat into US exports,business investment, manufacturing and agriculture.
The September dipin sales looked bigger after August's numbers were revised upward, however. Thesigns of a deceleration in consumer spending reported by the CommerceDepartment on Wednesday came on the heels of reports this month showing amoderation in job growth and services sector activity in September. The economyis being hamstrung by a 15-month trade war between the United States and China,which has soured business sentiment, leading to a decline in capitalexpenditure and a recession in manufacturing.
"Weakerretail numbers provide further evidence that weakness in the manufacturingsector is spilling over into other areas of the economy," said Jim Baird,chief investment officer at Plante Moran Financial Advisors in Kalamazoo,Michigan. Retail sales dropped 0.3 percent last month as households cut backspending on motor vehicles, building materials, hobbies and online purchases.That was the first drop since February.
Data for Augustwas revised up to show retail sales gaining 0.6 percent instead of 0.4 percentas previously reported. Economists polled by Reuters had forecast retail saleswould climb 0.3 percent in September. Compared to September last year, retailsales increased 4.1 percent. Excluding automobiles, gasoline, buildingmaterials and food services, retail sales were unchanged last month afteradvancing by an unrevised 0.3 percent in August. These so-called core retailsales correspond most closely with the consumer spending component of grossdomestic product.
Last month's dropand August's unrevised gain in core retail sales suggested a much moresignificant slowdown in consumer spending in the third quarter than economistshad been anticipating after a surge in the prior quarter. Consumer spending,which accounts for more than two-thirds of the economy, increased at a
4.6 percentannualized rate in the second quarter, the most in 1-1/2 years.
After the releaseof the data, economists cut their third-quarter consumer spending growthestimates to around a 2.5 percent rate from a 3.0 percent pace. Signs theeconomy's growth engine was sputtering could further stoke financial marketfears of a sharper slowdown in economic growth. Some economists speculated thecooling in hiring was probably making Americans more cautious about spending.
"Theslowdown in job growth is perhaps starting to influence spending habits, butwe'll need more data to confirm that thought," said Jennifer Lee, a senioreconomist at BMO Capital Markets in Toronto. Major US stock indexes weretrading lower while prices of US Treasuries were mostly higher. The dollar wasslightly weaker against a basket of currencies.
Broad weakness
Though PresidentDonald Trump announced a truce in the trade war with China last Friday, whichdelayed additional tariffs that were due this month, economists say the longesteconomic expansion on record remained in danger without all import duties beingrolled back. The International Monetary Fund warned on Tuesday that theUS-China trade war would cut 2019 global growth to its slowest pace since the 2008-2009financial crisis, and expressed caution over Trump's so-called Phase 1 tradedeal, saying more details were needed. Growth is also being restricted by thefading stimulus from last year's $1.5 trillion tax cut package.
With consumerspending slowing, a full trade deal still elusive and the likelihood of adisorderly exit from the European Union by Britain, many economists expect theFed to cut interest rates at its Oct. 29-30 policy meeting to keep theexpansion, now in its 11th year, on track. The US central bank cut rates inSeptember after reducing borrowing costs in July for the first time since 2008.
"Theweakness noted in the retail sales report will be seen by policymakers at theFederal Reserve as a cautionary note and will be yet another reason for the Fedto ease monetary policy again at its October meeting," said David Berson,chief economist at Nationwide in Columbus, Ohio. Sales at electronics andappliance stores were unchanged, getting no boost from the launch of Apple'snew iPhone model.
Sales at buildingmaterial stores fell 1.0 percent. Online and mail-order retail sales dropped0.3 percent, the most since December 2018. That followed a 1.2 percent increasein August. Spending at hobby, musical instrument and book stores dipped 0.1percent. But receipts at clothing stores rebounded 1.3 percent last month afterfalling 0.7 percent in August. Sales at furniture stores increased 0.6 percent.Sales at restaurants and bars gained 0.2 percent. - Agencies