US retail sales sag on autos, wholesale prices subdued
US retail sales sag on autos, wholesale prices subdued
Other data yesterday showed little inflation, with wholesale prices falling in October for the first time since May, giving the Federal Reserve latitude to maintain its ultra easy monetary policy stance to nurse the economy back to health.
Retail sales dipped 0.3 percent last month after a 1.3 percent increase in September, the Commerce Department said. Economists had expected sales to fall 0.2 percent.
The retail sales report offered an early read on the storm's impact on the economy. Its full impact will likely be felt in the November data.
Analysts estimate that the storm, which lashed the densely populated East Coast and caused up to $50 billion in damage, could shave as much as half a percentage point from fourth-quarter GDP.
"While we anticipate some positive payback later in the quarter, this suggests a soft start to the fourth quarter for real consumption," said Peter Newland, senior economist at Barclays in New York.
The Commerce Department said it had received indications from companies that the storm had both positive and negative effects on October's sales data.
US stock index futures held at higher levels while Treasury debt prices pared losses after the data.
Motor vehicle sales declined 1.5 percent, the largest fall since August last year, after increasing 1.7 percent in September. Auto manufacturers have blamed the storm for the drop in sales and expect a rebound in November.
Excluding autos, retail sales were unchanged last month after advancing 1.2 percent in September, the Commerce Department said.
The storm also likely dented sales at clothing stores, which dipped 0.1 percent after rising 0.4 percent the prior month.
Building material sales surprisingly fell 1.9 percent, defying expectations of a boost from pre-storm purchases. Building materials and garden equipment sales has increased 2.1 percent in September.
Receipts at gasoline stations surprisingly rose 1.4 percent last month. Gasoline sales had been expected to show some weakness because of a decline in gasoline prices during the month. Excluding gasoline, sales recorded their largest drop since May 2010.
Separately, the Labor Department said its seasonally adjusted producer price index slipped 0.2 percent last month, the first decline since May, after increasing 1.1 percent in September.
Economists had expected prices at farms, factories and refineries to increase 0.2 percent last month.
Wholesale prices excluding volatile food and energy costs also fell 0.2 percent, the largest fall since October 2010, after being flat in September. Economists had expected core PPI to rise 0.1 percent.
The benign tone of the producer price inflation report should give the Fed room to keep its low interest rate environment. Consumer inflation is currently hovering around the Fed's 2 percent target.
The US central bank in September launched a third round of asset purchases, committing to buy $40 billion worth of mortgage-backed securities every month until there is a sustained improvement in the labor market.
It hopes the purchases will drive down borrowing costs.
Aside from superstorm Sandy, the retail sales report highlighted the sluggishness of domestic demand.
Sales of electronics and appliances fell 1.0 percent, unwinding some of the prior month's boost from purchases of Apple's iPhone 5. Furniture sales fell 0.6 percent after dropping 0.2 percent in September.
So-called core retail sales, which exclude autos, gasoline and building materials, fell 0.1 percent after increasing 0.9 percent in September. Core sales correspond most closely with the consumer spending component of the government's gross domestic product report.
Last month's fall suggested consumer spending slowed early this quarter after ending the July-September period on a solid footing.
Merkel seeks united front with China amid Trump trade fears
- Merkel seeks common ground to ward off trade war
- Plans complicated by US policy moves
Chancellor Angela Merkel visits China on Thursday, seeking to close ranks with the world’s biggest exporting nation as US President Donald Trump shakes up explosive issues from trade to Iran’s nuclear deal.
Finding a common strategy to ward off a trade war and keep markets open will be Merkel’s priority when she meets with President Xi Jinping, as Washington brandishes the threat of imposing punitive tariffs on aluminum and steel imports.
“Both countries are in agreement that open markets and rules-based world trade are necessary. That’s the main focus of this trip,” Merkel’s spokeswoman Martina Fietz said in Berlin on Friday.
But closing ranks with Beijing against Washington risks being complicated by Saturday’s deal between China and the US to hold off tit-for-tat trade measures.
China’s economic health can only benefit Germany as the Asian giant is a big buyer of Made in Germany. But a deal between the US and China effectively leaves Berlin as the main target of Trump’s campaign against foreign imports that he claims harm US national security.
The US leader had already singled Germany out for criticism, saying it had “taken advantage” of the US by spending less than Washington on NATO.
Underlining what is at stake, French Economy Minister Bruno Le Maire warned the US-China deal may come “at the expense of Europe if Europe is not capable of showing a firm hand.”
Nevertheless, Merkel can look to her carefully nurtured relationship with China over her 12 years as chancellor.
No Western leader has visited Beijing as often as Merkel, who will be undertaking her eleventh trip to the country.
In China, she is viewed not only as the main point of contact for Europe, but, crucially, also as a reliable interlocutor — an antithesis of the mercurial Trump.
Devoting her weekly podcast to her visit, Merkel stressed that Beijing and Berlin “are both committed to the rules of the WTO” (World Trade Organization) and want to “strengthen multilateralism.”
But she also underlined that she will press home Germany’s longstanding quest for reciprocity in market access as well as the respect of intellectual property.
Ahead of her visit, Beijing fired off a rare salvo of criticism.
China’s envoy to Germany, Shi Mingde, pointed to a “protectionist trend in Germany,” as he complained about toughened rules protecting German companies from foreign takeovers.
Only 0.3 percent of foreign investors in Germany stem from China while German firms have put in €80 billion in the Asian giant over the last three decades, he told Stuttgarter Nachrichten.
“Economic exchange cannot work as a one-way street,” he warned.
Meanwhile, looming over the battle on the trade front is another equally thorny issue — the historic Iran nuclear deal, which risks falling apart after Trump pulled the US out.
Tehran has demanded that Europe keeps the deal going by continuing economic cooperation, but the US has warned European firms of sanctions if they fail to pull out of Iran.
Merkel “hopes that China can help save the atomic deal that the US has unilaterally ditched,” said Die Welt daily.
“Because only the giant emerging economy can buy enough raw materials from Iran to give the Mullah regime an incentive to at least officially continue to not build a nuclear weapon.”