U.S. retail sales growth slows in August
Last Updated: Friday, September 14, 2007 | 11:06 AM ET
A large jump in auto sales helped the overall U.S. retail sector post a modest gain in August, the U.S. Commerce Department reported Friday
Retail sales were up 0.3 per cent last month, compared to July's gain of 0.5 per cent.
However, the August increase was just half what economists had been expecting, and could heighten talk of slower consumer spending in the months ahead.
Auto sales in August had their largest increase since July 2006 as they rose by 2.8 per cent.
Separately, a poll of U.S. consumer confidence produced its lowest reading in more than a year.
Royal Bank said its RBC Cash Index slipped to a reading of 71.1 this month — a drop of 18 points from August's reading of 89.3. The index hit its lowest level last month since May 2006.
The index is based on a survey of consumer sentiment of 1,000 U.S. residents earlier this week.
"The magnitude in the drop of consumer confidence is not surprising given the rocky economic ride consumers are experiencing," said T.J. Marta, economic and fixed income strategist for RBC Capital Markets.
"Americans have a dim view of their current financial situation and an even bleaker view of their future prospects. Although some of the factors weighing on consumers could dissipate in coming weeks, the decline in confidence is consistent with our view that U.S. economic growth will moderate through the remainder of the year," Marta said in a release.
Consumers have been buffeted by stock market turmoil, rising interest rates and the fallout from problems in the subprime mortgage business in recent weeks.
Still, some analysts said the latest report suggests that the July-to-September quarter will be relatively positive for retail sales in the U.S., despite all the subprime difficulties.
"This is probably good news for markets worried about fallout from the recent financial market jitters on the consumer," Charmaine Buskas, TD Securities senior economic strategist, said in a commentary.
"This builds the case for the [Federal Reserve] to act judiciously and cut rates only [a quarter of a percentage point] at next Tuesday's meeting."
Some analysts have been suggesting that the Fed should cut by half a percentage point.
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