KingPriest2
10-15-2004, 09:42 AM
Economy on Track as Retail Sales Jump
2 hours, 28 minutes ago Business - Reuters
By Alister Bull
WASHINGTON (Reuters) - A surprisingly big climb in U.S. retail sales in September and a larger-than-expected gain in underlying producer prices bolstered hopes for an economic revival and views the Federal Reserve (news - web sites) will keep raising interest rates.
A Commerce Department (news - web sites) report on Friday showed U.S. retail sales rose by 1.5 percent in September, propelled by the sharpest jump in auto sales in nearly three years.
Wall Street had expected a 0.7 percent gain, following a revised 0.2 percent fall in August that was initially reported as a 0.3 percent decline.
In a separate release, the Labor Department (news - web sites) said U.S. producer prices -- those received by farms, factories and refineries -- edged up just 0.1 percent in September, held back by a big energy-price drop. But the so-called core index, which excludes food and energy, rose 0.3 percent.
Economists on Wall Street had been expecting both the overall and so-called core readings on producer prices to edge up 0.1 percent.
U.S. government bonds and the dollar dipped after the reports as dealers mulled the implication of stronger growth and pipeline price pressures for the U.S. central bank.
"This makes a December rate hike more likely," said Christopher Low, chief economist at FTN Financial.
The Fed meets twice more this year on Nov. 10 and Dec. 14 and futures markets are pricing at least one more quarter percentage point rise this year to take short-term rates to 2 percent.
BIGGEST SINCE MARCH
The overall retail sales increase was the biggest since March. Year-on-year, sales were up 7.7 percent, the Commerce Department said.
Economists scrutinize retail sales as a dominant component in consumer spending, which in turn makes up two-thirds of U.S. economic output and the numbers signal the third quarter ended strong as shoppers shrugged off record oil prices.
A surge in energy costs had crimped output in the second quarter, when growth slowed to 3.3 percent from 4.5 percent in the first quarter. But analysts expect a stronger performance for the period between July and September as consumption makes a bigger contribution.
"What is the most important is that the ex-auto component is twice what is expected," Low said.
Excluding autos, which can swing sharply from month to month, retail sales advanced a solid 0.6 percent after growing 0.2 percent in August. Analysts had expected this measure to edge up by just 0.3 percent.
Sales of motor vehicles and parts jumped 4.2 percent, the largest increase since October 2001 when they soared 24.2 percent as car makers offered attractive incentives to tempt buyers in the wake of the Sept. 11 attacks on U.S. cities.
According to the Labor Department report, prices for finished energy goods tumbled 0.9 percent last month, while food costs inched ahead just 0.1 percent.
2 hours, 28 minutes ago Business - Reuters
By Alister Bull
WASHINGTON (Reuters) - A surprisingly big climb in U.S. retail sales in September and a larger-than-expected gain in underlying producer prices bolstered hopes for an economic revival and views the Federal Reserve (news - web sites) will keep raising interest rates.
A Commerce Department (news - web sites) report on Friday showed U.S. retail sales rose by 1.5 percent in September, propelled by the sharpest jump in auto sales in nearly three years.
Wall Street had expected a 0.7 percent gain, following a revised 0.2 percent fall in August that was initially reported as a 0.3 percent decline.
In a separate release, the Labor Department (news - web sites) said U.S. producer prices -- those received by farms, factories and refineries -- edged up just 0.1 percent in September, held back by a big energy-price drop. But the so-called core index, which excludes food and energy, rose 0.3 percent.
Economists on Wall Street had been expecting both the overall and so-called core readings on producer prices to edge up 0.1 percent.
U.S. government bonds and the dollar dipped after the reports as dealers mulled the implication of stronger growth and pipeline price pressures for the U.S. central bank.
"This makes a December rate hike more likely," said Christopher Low, chief economist at FTN Financial.
The Fed meets twice more this year on Nov. 10 and Dec. 14 and futures markets are pricing at least one more quarter percentage point rise this year to take short-term rates to 2 percent.
BIGGEST SINCE MARCH
The overall retail sales increase was the biggest since March. Year-on-year, sales were up 7.7 percent, the Commerce Department said.
Economists scrutinize retail sales as a dominant component in consumer spending, which in turn makes up two-thirds of U.S. economic output and the numbers signal the third quarter ended strong as shoppers shrugged off record oil prices.
A surge in energy costs had crimped output in the second quarter, when growth slowed to 3.3 percent from 4.5 percent in the first quarter. But analysts expect a stronger performance for the period between July and September as consumption makes a bigger contribution.
"What is the most important is that the ex-auto component is twice what is expected," Low said.
Excluding autos, which can swing sharply from month to month, retail sales advanced a solid 0.6 percent after growing 0.2 percent in August. Analysts had expected this measure to edge up by just 0.3 percent.
Sales of motor vehicles and parts jumped 4.2 percent, the largest increase since October 2001 when they soared 24.2 percent as car makers offered attractive incentives to tempt buyers in the wake of the Sept. 11 attacks on U.S. cities.
According to the Labor Department report, prices for finished energy goods tumbled 0.9 percent last month, while food costs inched ahead just 0.1 percent.