Home Retail Rising fuel cost slows US retail sales

    Rising fuel cost slows US retail sales


    Rising fuel prices and fall in property value led to slow pace of retail sales in the U.S in October as it left shoppers with little extra cash to spend, economists said.

    Purchases rose 0.1 percent, the smallest increase in four months, after climbing 0.6 percent in September, according to the median estimate in a Bloomberg News survey.

    Americans cut down on purchase of clothing and furniture to pay their energy bills, adding to concern that a slowdown in consumer spending will weaken economic growth.

    Federal Reserve policy makers have signaled a reluctance to lower interest rates again as the jump in fuel expenses poses risks for both the expansion and prices.

    “A slow holiday shopping season will mark the beginning of an extended consumption slowdown,” said Drew Matus, a senior economist at Lehman Brothers Holdings Inc. in New York. “Perhaps the biggest concern is the rise in energy prices.”

    The 76 forecasts in the Bloomberg survey ranged from a decline of 0.4 percent to a gain of 0.5 percent. Retail sales make up almost half of all consumer spending, which in turn accounts for more than two-thirds of the economy.

    The economy will grow at an annual rate of 1.5 percent from October through December, less than half the pace of the previous three months, according to the median forecast in a Bloomberg survey from November one to eight. Consumer spending will rise at a two percent rate, also slower than the third quarter, the survey showed.

    Unseasonably warm weather made matters worse for merchants last month as demand for jackets and sweaters waned. Seven out of 10 retailers, including Wal-Mart Stores Inc. and Macy’s Inc., reported October sales below analysts’ forecasts, according to a report last week from Retail Metrics LLC.

    Wal-Mart marked down 15,000 holiday items, 20 percent more than last year, and started discounting toys in the beginning of October, more than two weeks earlier than in 2006. The world’s largest retailer Tuesday reported an increase in third-quarter profit, helped by the price-cutting strategy.