US retail sales declined last month as consumers pulled back on spending for a range of items, a worrisome economic signal that helped fuel a sell-off on Wall Street.
The report on Wednesday, along with data showing a drop in producer prices, led investors to bet the US Federal Reserve would delay hiking interest rates until late next year at the earliest to keep support for the economy in place.
Retail sales, which account for about one third of consumer spending, dropped 0.3 percent last month, the US Department of Commerce said. It was the first decrease since January.
“Consumers have turned more cautious,” said Ted Wieseman, an economist at Morgan Stanley in New York, who cut his third-quarter economic growth forecast to 3.1 percent from 3.4 percent on the figures.
Prices for US stocks tumbled as much as 3 percent during the day, although the Standard & Poor’s 500 index closed down just 0.8 percent.
Sounding a less dour note, the Fed said in its so-called Beige Book that the economy continued to expand at a “modest to moderate” pace across much of the nation in recent weeks.
Wage growth, however, remained modest in most areas, even as employers bid up wages in some particular industries, it said.
With wages under wraps, inflation has failed to gain a toehold and the Fed said businesses reported little if any change in prices over the past several weeks.
In a separate report, the US Department of Labor said prices received by US producers actually fell 0.1 percent last month, the first decline in more than a year.
While Fed officials have been concerned that inflation has been stuck below their 2 percent target, other signs of strength in the economy had left them optimistic they would finally be able to raise benchmark overnight rates from zero by mid next year.
The reports on Wednesday suggested he may be kept waiting a bit longer.
“Little inflation pressure [is] in the pipeline,” RBS economists said in a note to clients.
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