U.S. retail sales unexpectedly posted the first decline in seven months, suggesting consumers are starting to become shaky as the main pillar of economic growth.
Prices on 10-year Treasuries rose, while U.S. stocks fell after the data release.
A separate report Wednesday showed U.S. homebuilder sentiment climbed to the highest level since early 2018 amid cheaper borrowing costs and a still-sturdy job market.
The value of overall sales fell 0.3% in September from the previous month after an upwardly revised 0.6% increase in August, Commerce Department figures showed Wednesday. The median estimate in a Bloomberg survey called for a 0.3% advance.
Sales in the "control group" subset, which some analysts view as a more reliable gauge of underlying consumer demand, were little changed, missing projections for a 0.3% increase. The measure excludes food services, car dealers, building-materials stores and gasoline stations.
The surprise drop in retail sales is the first decline since February and may indicate cracks are forming in the consumer spending that's propped up economic growth in recent months. Together with weaker business investment and manufacturing, along with a lingering trade war, weaker consumption would increase risks to the nation's longest economic expansion on record.
Consumer spending was strong in the spring, and economists had been counting on continued strength to protect the U.S. economy as it is buffeted by the fallout from the trade war with China.
Despite solid income growth and other favorable fundamentals for consumers, "there were a lot of gloomy headlines" in September on topics such as trade talks, said Stephen Stanley, chief economist at Amherst Pierpont Securities LLC. "People might have gotten a little cautious."
The overall economy grew at a 2% annual rate in the April-June quarter with much of that strength coming from a 4.6% surge in consumer spending, which accounts for about 70% of economic activity.
That spending pace had been expected to slow in the July-September quarter but still remain strong enough to support economic growth near the 2% rate seen in the spring.
While consumer spending and job gains were likely solid overall during the third quarter, the latest figures as well as the employment report earlier this month suggest a loss of momentum heading into the last part of 2019. With global weakness and trade head winds already leading Federal Reserve officials to lower interest rates at the last two meetings, some policymakers may see reason to cut again at the central bank's next gathering Oct. 29-30 in Washington.
The retail sales report showed seven of 13 major categories posted declines. Nonstore retailers, which includes online shopping, fell 0.3%, the biggest drop since December. General merchandise stores were down 0.3%, building materials fell 1% and sporting goods, hobby, musical instrument and book stores dropped 0.1%.
Increases were led by apparel, health and personal care, and furniture and home furnishings. One sector, electronics and appliance stores, was unchanged.
Fuel-station receipts decreased 0.7%, the report showed, after energy prices dropped in last week's consumer-price data. The retail figures aren't adjusted for price changes, so sales could reflect changes in gasoline costs, sales, or both.
Spending at automobile dealers dropped 0.9%, the biggest decline since January, after increasing 1.9% in the previous month. Industry data from Wards Automotive Group previously showed the industry sales rate rose for a second month in September.
"It's a surprise relative to expectations. It's a surprise in the details. It is a bit more uniformly weak than a lot of people expected, including myself," Steven Ricchiuto, chief U.S. economist at Mizuho Securities USA LLC, said on Bloomberg Radio.
The sales data don't capture all of household purchases and tend to be volatile because they aren't adjusted for changes in prices. Personal-spending figures, which also span services, will offer a fuller picture of U.S. consumption in data due at the end of the month.
Compared with the downbeat retail report, new data showing homebuilder sentiment rising suggests Americans continue to buy homes -- and builders expect demand to strengthen in the coming months.
The National Association of Home Builders/Wells Fargo Housing Market Index has risen to 71 this month, the highest level since February 2018 and the fourth-straight advance. Housing has also benefited from sustained wage gains. Sales are running at the fastest pace since early 2018, and groundbreakings are at a 12-year high.
"The October spike in NAHB corroborates with other housing statistics that indicate low mortgage rates have finally been filtering into housing activity," said Yelena Shulyatyeva, senior U.S. economist at Bloomberg Economics. "However, we estimate the positive impact will be limited due to heightened economic uncertainty."
Information for this article was contributed by Reade Pickert, Chris Middleton, Sophie Caronello and William Edwards of Bloomberg News and by Martin Crutsinger of The Associated Press.
Business on 10/17/2019
Print Headline: September retail sales slip 0.3%