Gold Silver Reports — Weak US Data Dims Prospects of a Fed Hike — US retail sales were unexpectedly flat in July as Americans cut back on purchases of clothing and other goods, pointing to a moderation in consumer spending that could temper expectations of an acceleration in economic growth in the third quarter .
Other data on Friday showed producer prices recorded their biggest drop in nearly a year in July amid declining costs for services and energy goods. Cooling consumer spending and tame inflation suggest the Federal Reserve will probably not raise interest rates anytime soon despite a robust labour market.
July’s unchanged retail sales reading followed an upwardly revised 0.8% increase in June, the Commerce Department said. Retail sales in June were previously reported to have increased 0.6%. Sales rose 2.3% from a year ago. Excluding automobiles, gasoli ne, building materials and food services, retail sales were also unchanged last month after rising 0.5% in June.
These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. Economists had forecast overall retail sales rising 0.4% and core sales climbing 0.3% last month.
U.S. stock futures and the dollar fell after the data, while interest rate futures added to gains. Prices of U.S. Treasuries rose.
WEAK PRODUCER INFLATION
In a separate report, the Labor Department said its producer price index for final demand dropped 0.4% last month, the first decline since March and the largest since September 2015. It increased 0.5% in June.
In the 12 months through July, the PPI slipped 0.2%. That was the biggest drop since December 2015 and followed a 0.3% increase in the 12 months through June. Economists had forecast the PPI edging up 0.1% last month and gaining 0.2% from a year ago.
A strong dollar and cheaper oil continue to keep price pressures muted, leaving inflation running persistently below the Fed’s 2% target. Fed officials have repeatedly expressed concern about persistently low inflation.
The US central bank raised its benchmark overnight interest rate last December for the first time in nearly a decade. Although a Re uters poll on Thursday found that most economists expect another rate increase in December, financial markets currently anticipate such a move only next year.
Interest rate futures after Friday’s data placed only a 43% probability of a December rate hike, compared to 47% before the data.
Robust consumer spending has helped to cushion the blow on the economy from an inventory correction and the prolonged drag from lower oil prices that have restricted GDP growth to an average 1.0% annualised rate in the last three quarters.
Friday’s data suggested consumer spending was cooling after the second quarter’s brisk 4.2 percent rate of increase.
Despite the surprise weakness in retail sales in July, consumer spending remains supported by a strong labor market as well as rising home and stock market prices. The economy created a total of 547,000 jobs in June and July . — Neal Bhai Reports