NEW YORK CITY: In this file photo, customers shop at Apple's flagship 5th Avenue store in New York City. American consumers tightened their purse strings unexpectedly last month, breaking a seven-month winning streak, government data showed yesterday.-AFP

WASHINGTON: US
retail sales fell for the first time in seven months in September, suggesting
that manufacturing-led weakness could be spreading to the broader economy,
keeping the door open for the Federal Reserve to cut interest rates again later
this month. Consumers tightened their purse strings unexpectedly last month,
breaking a seven-month winning streak, government data showed yesterday.
Shoppers took home fewer autos and spent less on gasoline, groceries and
building supplies while buying less online as well, according to the Commerce
Department.

The September
slump meant momentum waned at the end of the third quarter and could be a
worrying development for the world's largest economy. The American consumer is
almost single-handedly sustaining the US expansion as the economy in the rest
of the world slows and President Donald Trump's trade wars eat into US exports,
business investment, manufacturing and agriculture.

The September dip
in sales looked bigger after August's numbers were revised upward, however. The
signs of a deceleration in consumer spending reported by the Commerce
Department on Wednesday came on the heels of reports this month showing a
moderation in job growth and services sector activity in September. The economy
is being hamstrung by a 15-month trade war between the United States and China,
which has soured business sentiment, leading to a decline in capital
expenditure and a recession in manufacturing.

"Weaker
retail numbers provide further evidence that weakness in the manufacturing
sector is spilling over into other areas of the economy," said Jim Baird,
chief investment officer at Plante Moran Financial Advisors in Kalamazoo,
Michigan. Retail sales dropped 0.3 percent last month as households cut back
spending on motor vehicles, building materials, hobbies and online purchases.
That was the first drop since February.

Data for August
was revised up to show retail sales gaining 0.6 percent instead of 0.4 percent
as previously reported. Economists polled by Reuters had forecast retail sales
would climb 0.3 percent in September. Compared to September last year, retail
sales increased 4.1 percent. Excluding automobiles, gasoline, building
materials and food services, retail sales were unchanged last month after
advancing by an unrevised 0.3 percent in August. These so-called core retail
sales correspond most closely with the consumer spending component of gross
domestic product.

Last month's drop
and August's unrevised gain in core retail sales suggested a much more
significant slowdown in consumer spending in the third quarter than economists
had been anticipating after a surge in the prior quarter. Consumer spending,
which accounts for more than two-thirds of the economy, increased at a

4.6 percent
annualized rate in the second quarter, the most in 1-1/2 years.

After the release
of the data, economists cut their third-quarter consumer spending growth
estimates to around a 2.5 percent rate from a 3.0 percent pace. Signs the
economy's growth engine was sputtering could further stoke financial market
fears of a sharper slowdown in economic growth. Some economists speculated the
cooling in hiring was probably making Americans more cautious about spending.

"The
slowdown in job growth is perhaps starting to influence spending habits, but
we'll need more data to confirm that thought," said Jennifer Lee, a senior
economist at BMO Capital Markets in Toronto. Major US stock indexes were
trading lower while prices of US Treasuries were mostly higher. The dollar was
slightly weaker against a basket of currencies.

Broad weakness

Though President
Donald Trump announced a truce in the trade war with China last Friday, which
delayed additional tariffs that were due this month, economists say the longest
economic expansion on record remained in danger without all import duties being
rolled back. The International Monetary Fund warned on Tuesday that the
US-China trade war would cut 2019 global growth to its slowest pace since the 2008-2009
financial crisis, and expressed caution over Trump's so-called Phase 1 trade
deal, saying more details were needed. Growth is also being restricted by the
fading stimulus from last year's $1.5 trillion tax cut package.

With consumer
spending slowing, a full trade deal still elusive and the likelihood of a
disorderly exit from the European Union by Britain, many economists expect the
Fed to cut interest rates at its Oct. 29-30 policy meeting to keep the
expansion, now in its 11th year, on track. The US central bank cut rates in
September after reducing borrowing costs in July for the first time since 2008.

"The
weakness noted in the retail sales report will be seen by policymakers at the
Federal Reserve as a cautionary note and will be yet another reason for the Fed
to ease monetary policy again at its October meeting," said David Berson,
chief economist at Nationwide in Columbus, Ohio. Sales at electronics and
appliance stores were unchanged, getting no boost from the launch of Apple's
new iPhone model.

Sales at building
material stores fell 1.0 percent. Online and mail-order retail sales dropped
0.3 percent, the most since December 2018. That followed a 1.2 percent increase
in August. Spending at hobby, musical instrument and book stores dipped 0.1
percent. But receipts at clothing stores rebounded 1.3 percent last month after
falling 0.7 percent in August. Sales at furniture stores increased 0.6 percent.
Sales at restaurants and bars gained 0.2 percent. - Agencies