US retail sales staged their sharpest fall in nearly a year last month while producer prices posted their biggest decline in nearly two years, according to US government data today.
Retail sales dropped an surprisingly large 0.5 per cent as Americans bought fewer cars and cut back on clothing purchases, the Commerce Department said.
A separate report showed US producer prices plunged a sharper-than-expected 0.6 per cent last month on tumbling energy prices and lower food costs. Bond prices rallied as traders took the reports as a sign the Federal Reserve would stay on a gradual course of interest-rate rises.
The overall retail sales drop was the largest since a matching fall last June, the Commerce Department said, and exceeded the 0.2 per cent fall forecast by analysts.
It was also the first outright decline since last August and came on the heels of an upwardly revised 1.5 per cent gain in April.
Although the Fed has expressed optimism that an energy price-led soft stretch earlier this year will prove fleeting, the weak retail sales number may be a sign consumer spending - which fuels about two-thirds of US economic output - is faltering.
However, separate reports on chain-store sales showed a pick-up in shopping last week. On the price front, the Labor Department said prices were surprisingly tame even outside food and energy.
Without those volatile sectors, the producer price index, a gauge of prices received by farms, factories and refineries, rose a mild 0.1 per cent.
The report was likely to further beat back inflation concerns in financial markets. Wall Street economists had expected overall producer prices to slip just 0.2 per cent, with core prices moving up by 0.2 per cent.
The department said energy prices plunged 3.5 per cent, the biggest drop since April 2003.