WASHINGTON Retail sales fell in November for the first time in seven months as car sales slumped and demand slowed at many retailers when the holiday shopping season began.
Retail sales have suddenly fizzled out as worries over heating costs this winter and a stock market decline have suddenly made Americans very cautious, said Chris Rupkey, senior financial economist at Bank of Tokyo-Mitsubishi Ltd. in New York.
Sales fell 0.4% in November after no change in October, the Commerce Department said. Excluding automobiles, sales rose 0.2%, the smallest gain in three months, after a 0.4% October increase.
As spending slows, the expansion is more likely to limp than sprint to its 10th anniversary early next year. Treasury securities gained as further evidence of a slowdown was expected to reassure Federal Reserve policymakers that consumer spending, which accounts for two-thirds of the nations economic output, is slowing to a pace at which demand would not exceed supply and, thus, ignite inflation. The data could set the stage for an interest rate cut early next year.
Separate figures from the Labor Department showed that imported goods costs are contained. This is impeding the ability of U.S. companies to raise prices as they strive to stay competitive. Import prices rose 0.2% in November after a 0.5% October decrease. Excluding petroleum, import prices fell 0.1% after showing no change a month earlier.
Import prices are 0.5% higher over the past 12 months, when oils cost is omitted. That compares with a 0.2% decline for the 12 months through November 1999.
Personal spending is on track to rise at a 2.8% annual rate in the fourth quarter, according to statistics compiled by Bloomberg News. That would be the slowest pace since a 2.5% annualized gain in the second quarter of 1999.
This may lead central bankers to conclude that the risks facing the economy are becoming balanced between inflation and recession, which could let them cut interest rates if the economy cools further. Fed policymakers are to meet next Tuesday.
The implied yield on the federal funds futures contract for March directly tied to the Feds target interest rate on overnight loans between banks fell 3 basis points Wednesday, to 6.19%. This suggests that investors expect the Fed to cut the overnight rate one-quarter percentage point by then, from the current 6.5%, a nine-year high.