WASHINGTON: US retail sales recorded their smallest gain in six months in August as consumers cut back on purchases of motor vehicles and clothing, but upward revisions to July data kept intact expectations of strong economic growth in the third quarter.
Other data on Friday showed the biggest drop in import prices in more than 1-1/2 years in August amid a decline in the cost of fuels and a range of other goods. The weak import price data came on the heels of soft inflation readings in August.
Signs of cooling consumer spending and inflation did not change views that the Federal Reserve will raise interest rates later this month. The US central bank has increased borrowing costs twice this year.
“The seas are calm for the economy with enough wind in the sails to keep the expansion on track and not enough inflation pressures out there to halt the economy’s forward progress,” said Chris Rupkey, chief economist at MUFG in New York.
The Commerce Department said retail sales edged up 0.1 per cent last month, the smallest rise since February. Data for July was revised higher to show sales rising 0.7 per cent instead of the previously reported 0.5 per cent gain.
Economists polled by Reuters had forecast retail sales increasing 0.4 per cent in August. Retail sales in August advanced 6.6 per cent from a year ago. Excluding automobiles, gasoline, building materials and food services, retail sales nudged up 0.1 per cent last month after an upwardly revised 0.8 per cent jump in July.
These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.
Core retail sales were previously reported to have increased 0.5 per cent in July.
Annual wage growth increased at its fastest pace in more than nine years in August and there were a record 6.9 million job openings in July. Spending is also being underpinned by tax cuts and higher savings as well as high consumer sentiment.
“Consumer spending will continue to increase at a sturdy pace through the rest of this year and into 2019, supporting overall economic growth,” said Gus Faucher, chief economist at PNC Financial in Pittsburgh.
The dollar rose against a basket of currencies on the data. US Treasury prices fell, lifting the yield on the benchmark 10-year note back above 3 per cent. Stocks on Wall Street were trading slightly lower.
The economy is poised for strong growth in the third quarter and this year, but an escalating trade war between the United States and China is casting a shadow on the long-term outlook. — Reuters
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