Weak U.S. retail sales cast gloom over economy – Reuters

Weak U.S. retail sales cast gloom over economy – Reuters

WASHINGTON (Reuters) - U.S. retail sales fell for the first time in seven months in September, suggesting that manufacturing-led weakness could be spreading to the broader economy, keeping the door open for the Federal Reserve to cut interest rates again later this month. The signs of a deceleration in consumer spending reported by the Commerce…

WASHINGTON (Reuters) – U.S. retail sales fell for the first time in seven months in September, suggesting that manufacturing-led weakness could be spreading to the broader economy, keeping the door open for the Federal Reserve to cut interest rates again later this month. The signs of a deceleration in consumer spending reported by the Commerce Department on Wednesday came on the heels of reports this month showing a moderation in job growth and services sector activity in September. The economy is being hamstrung by a 15-month trade war between the United States and China, which has soured business sentiment, leading to a decline in capital expenditure and a recession in manufacturing. “Weaker retail numbers provide further evidence that weakness in the manufacturing sector 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% last month as households cut back spending on motor vehicles, building materials, hobbies and online purchases. That was the first drop since February. Data for August was revised up to show retail sales gaining 0.6% instead of 0.4% as previously reported. Economists polled by Reuters had forecast retail sales would climb 0.3% in September. Compared to September last year, retail sales increased 4.1%. Excluding automobiles, gasoline, building materials and food services, retail sales were unchanged last month after advancing by an unrevised 0.3% in August. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. Last month’s drop and August’s unrevised gain in core retail sales suggested a much more significant slowdown in consumer spending in the third quarter than economists had 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% annualized rate in the second quarter, the most in 1-1/2 years. After the release of the data, economists cut their third-quarter consumer spending growth estimates to around a 2.5% rate from a 3.0% pace. Signs the economy’s growth engine was sputtering could further stoke financial market fears of a sharper slowdown in economic growth. Some economists speculated the cooling in hiring was probably making Americans more cautious about spending. “The slowdown in job growth is perhaps starting to influence spending habits, but we’ll need more data to confirm that thought,” said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto. Major U.S. stock indexes were trading lower while prices of U.S. Treasuries were mostly higher. The dollar .DXY was slightly weaker against a basket of currencies. BROAD WEAKNESS Though President Donald Trump announced a truce in the trade war with China last Friday, which delayed additional tariffs that were due this month, economists say the longest economic expansion on record remained in danger without all import duties being rolled back. The International Monetary Fund warned on Tuesday that the U.S.-China trade war would cut 2019 global growth to its slowest pace since the 2008-2009 financial
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