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U.S. Retail Sales Disappoint, Consumer Sentiment Falters

Posted by Joseph Trevisani on Sep 13, 2013 10:18:00 AM

American consumers spent less money than predicted in August the latest sign that the recovery that the Federal Reserve had predicted would strengthen in the third quarter may be weakening.

In a separate report consumer sentiment fell to a five month low in September as Americans worried about the effect of higher interest rates on growth, jobs and the housing market.

Retail sales rose 0.2 percent last month according to the Commerce Department, with purchases of cars, appliances electronics and furniture gaining and building material and clothing declining. Economists in the Reuters survey had forecast an increase of 0.4 percent. The July figure doubled on revision to 0.4 percent. It was the fifth monthly gain in a row. Yearly the sales increase dropped to 4.7 percent in August from 5.7 percent in July.

Retail sales account for 30 percent of overall consumer spending.

The University of Michigan index of consumer sentiment dropped to 76.8 in September, below the 82.0 forecast in the Bloomberg survey of economists and August's 82.0 reading. It was the weakest score since April.

Consumers' assessment of their current situation sank to 91.8 from 95.2 in August, also the poorest result since April. Consumer expectations decreased to 67.2 from 73.7 for the lowest reading since January.

Retail sales excluding automobiles climbed 0.1 percent, a third of the estimate and the prior month was revised 0.1 percent higher to 0.6 percent.

The so-called 'sales control group' or  'core sales", the category closest to the consumer spending component of gross domestic product added 0.2 percent, less than the 0.3 percent forecast. July's number was unchanged at 0.5 percent. This category has increased for fourteen straight months and twenty-two of the last twenty -four months.

GDP expanded at a 1.1 percent annual pace in the first quarter and a 2.5 percent rate in the second three months of the year.

In the first quarter 'core sales' grew an average of 0.20 percent a month, in the second that dropped to 0.17 percent. In the two months of the third quarter reported so far, 'core sales have averaged a 0.36 percent increase per month.

Retail sales themselves have averaged a 0.30 percent gain in the first quarter and a 0.46 percent gain in the second and a 0.30 percent boost in July and August.

 Joseph Trevisani

Chief Market Strategist

WorldWideMarkets

Charts: Bloomberg

ScreenHunter 1789 Sep. 13 13.33

ScreenHunter 1790 Sep. 13 13.35

ScreenHunter 1791 Sep. 13 13.37

ScreenHunter 1792 Sep. 13 13.38

 

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