Investing.com - Market players pushed back expectations for the next U.S. rate hike after data showed that retail sales declined for the first time in five months, fueling concerns over the economic outlook.
The Commerce Department said that retail sales dropped 0.3% from the prior month, compared to the forecast for a decline of 0.1%.
Core retail sales, which excludes automobile sales, unexpectedly fell by a seasonally adjusted 0.1% in August, compared to forecasts for an advance of 0.2%.
Declining retail sales over time correlate with weaker economic growth, while rising sales signal a strengthening economy. Consumer spending accounts for as much as 70% of U.S. economic growth.
A separate report released at the same time showed that U.S. wholesale prices were flat in August, mostly because of sharp declines in the cost of food and gasoline.
Meanwhile, the number of people who filed for unemployment assistance in the U.S. last week rose less than expected, remaining in territory associated with a healthy labor market.
The number of individuals filing for initial jobless benefits last week increased by 1,000 to 260,000 from the previous week’s total of 259,000, the Labor Department said.
At the same time, two regional manufacturing gauges both improved in September, but the Philadelphia region showed moderate growth while the New York region was remained mired in contraction.
The Philadelphia Fed’s manufacturing index improved to a reading of 12.8 in September from 2.0 in August.
In contrast, the Empire State manufacturing index, which measures conditions in the New York area, remained in contraction territory, inching up to negative 2.0 in September from negative 4.2 in August.
The disappointing data lowered the potential for the Federal Reserve to raise rates at its meeting later this month.
According to Investing.com's Fed Rate Monitor Tool, investors are pricing in just a 9% chance of a rate hike at the Fed's September 20-21 meeting, down from 15% ahead of the data.
For December, odds stood at 50%, compared to 54% before the data arrived.