Consumers may have saved on lower fuel costs in September, but they pocketed the money instead of spending it.
U.S. retail and food services sales for September rose just 0.1% from the previous month, the Commerce Department said Wednesday. The median forecast of 82 economists surveyed by Bloomberg was a 0.2% rise.
The September increase was largely due to a 1.8% month-over-month increase in auto sales. Excluding motor vehicles and parts, sales at other retailers were down 0.3% in September.
According to The Wall Street Journal, the unexpected softness in retail sales “could change the Federal Reserve’s calculus on the timing of its first interest-rate increase in nearly 10 years. Many central bank officials have said they expect to begin moving rates higher this year, but have said such a move is dependent on incoming data.”
The September figures “supports our view that the Fed probably isn’t going to hike interest rates until early next year,” Paul Ashworth, chief U.S. economist at Capital Economics, told the WSJ.
Consumer spending accounts for about 70% of economic activity in the U.S. and represents a key measure of the economy’s health.
“The main takeaway from this report is to both reinforce the view that a rate hike in October is a 0% probability event while also providing fodder for those arguing the economy noticeably downshifted in the third quarter,” said Dan Greenhaus, chief strategist at BTIG.
Also on Wednesday, the Labor Department reported that the Producer Price Index for final demand declined to a seasonally adjusted 0.5% in September. On an unadjusted basis, the final demand index fell 1.1% for the 12 months ended in September, the eighth straight 12-month decline.
The index for final demand goods moved down 1.2% percent in September, the largest decrease since a 1.9% drop in January. The decline reflects in large part a 5.9% fall in prices for final demand energy.
“While lower fuel costs depress filling-station receipts, they remain a tailwind for consumers,” Bloomberg wrote. “Turmoil in financial markets may be prompting consumers to put some of those savings in the bank rather than spending it at the mall.”