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US retail sales post decline in Sept in a sign that country's economy may be in trouble

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Washington DC | October 20, 2019 1:41:39 PM IST
United States retail sales posted an unexpected decline of 0.3 per cent in September from the prior month, the Commerce Department has said, revealing a crack in the strongest and most resilient pillar of the country's economic growth.

The figure contrasts with the 0.6 per cent growth rate in August and 0.7 per cent in July, and have come amid other worrying signs, such as a slowdown in manufacturing and weaker growth in the service sector. The drop in retail sales indicates that cracks are forming in consumer spending, a report by Fortune points out.

"While this is by no means conclusive evidence that the consumer is wavering, it nonetheless reinforces our ongoing concern that a spending retrenchment will ultimately trigger a more durable slowdown," BMO Capital Markets' Ian Lyngen said in a research note.

Fortune's report suggests that consumer spending makes up more than two-thirds of the US economy. The customer spending increased by 3 per cent in the second quarter, when the overall GDP of the country grew by 2 per cent. The suggestion that the customers could be trimming their household budgets comes as bad news at the wrong time for the US economy.

Following the reports, it remains unclear as to whether the Federal Reserve is prepared to cut the interest rates for the third time since July last year. It may be noted here that the 0.3 per cent slowdown is nowhere near as large as the 2 per cent drop last December.

Meanwhile, Charles Evans, President of the Federal Reserve Bank of Chicago, has indicated that the Fed may be done raising interest rates not just for the rest of this year, but throughout 2020 as well.

"I think policy probably is in a good place right now," Evans said in a speech in Peoria, Illinois. "In September the median FOMC participant saw no additional change in the target range for the federal funds rate through the end of 2020 and one 25-basis-point increase in each of 2021 and 2022. My own assessment is pretty much in line with this median outlook." (ANI)

 
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