US retail sales dipped in August and the most comprehensive gauge of the US international trade gap widened to a record in the second quarter, government reports showed.
The Commerce Department said retail sales fell 0.3% in August - more than the 0.1% drop that Wall Street analysts had projected - but sales excluding autos rose 0.2%, matching expectations.
July sales figures were revised upward to advance 0.8% overall and 0.3% outside of cars, compared with the previously reported 0.7% and 0.2% gains.
In a separate report, the department said the US current account gap - the broadest measure of trade and investment flows between the United States and the rest of the world - widened again in the second quarter, growing to a record $166.18 billion. That was well above analysts’ expectations for a $159.35 billion shortfall.
The data did nothing to dissuade investors from believing the Federal Reserve will raise interest rates again when it holds a policy-setting meeting next week.
Stocks were almost unchanged, with the Dow Jones industrial average up by three points or 0.03% by the end of the trading day. The data also did little to affect prices for US Treasury securities, which mostly held steady.
Aside from cars…
In the retail sales report, economists focused on the ex-autos numbers as a sign consumer spending was holding up, despite reports earlier this month of disappointing back-to-school retail sales.
“We know that higher energy prices are nibbling away at consumers’ spending power and a relatively slow job market is adding to their hesitancy to spend more freely. In this type of environment, solid but not enthusiastic spending actually is a good sign,” said Oscar Gonzalez, economist with MFC Global Investment Management in Boston.
Auto sales slid 1.9% in August, their biggest fall since June. Some other categories also showed weakness, including clothing, which dropped 1.4%, and department stores, which saw a 0.8% decline.
Still, other sectors picked up the slack. So-called non-store retailers - Internet and catalog businesses - saw sales rise 1.7%, while sales at health and drug stores were up one percent.
Two weeks ago, Federal Reserve Chairman Alan Greenspan told a House of Representatives committee “the expansion has regained some traction” though early readings on August retail sales had been “mixed.”
The US central bank is widely expected to raise interest rates on Sept. 21 for a third time this year, as it moves to forestall potential inflation that could accompany growth.
The current account gap figures, despite setting a record, did not appear to worry economists much.
“The bottom line on the current account is it’s an all-time record. It just shows that the United States is continuing to rely on the world’s savings to an increasing degree,” said Sean Callow, currency strategist with IDEAglobal in New York.
Analysts were surprised by the drop in international investment income, which fell to only $2.64 billion in the second quarter from $12.16 billion in the first three months of the year, widening the second quarter gap.
While economists have long worried about the size of the current account imbalance, and have said it will lead to a drop in the dollar’s value in foreign exchange markets, the United States has continued to attract international investment. Net inflows of capital totaled $71.8 billion in June, according to Treasury Department data.
Chain store sales up
Sales at major retailers rose 3.0% on a year-over-year basis for the week ended Sept. 11, up from the preceding week’s 2.9% pace, said Redbook Research, an independent company.
The International Council of Shopping Centers and UBS said in a joint report chain store sales rose by 0.2% in the week ended September 11, compared with flat sales in the previous week. Compared with the same week a year ago, sales increased 2.7%, up from the 2.1% pace of the preceding week. (Reuters)