U.S. retail sales unexpectedly declined for the first time in seven months in September, boosting the chances of another interest rate cut from the Federal Reserve in October amid rising fears that the economic growth slowdown is spreading into the consumer sector.
Seasonally and calendar-adjusted U.S. retail and food services sales slipped 0.3% to $525.56 billion in September from $526.89 billion in August, advance data from the U.S. Census Bureau showed.
The consensus estimate of economists polled by Econoday was for the sales to rise 0.3%.
The latest retail sales report is "not encouraging" amid concerns on how long consumer spending can continue to prop up the U.S. economy, according to James Knightley, chief international economist at ING. He said the softer-than-expected retail sales data will reinforce the case for further stimulus from the Federal Reserve, which lowered its benchmark interest rate by 25 basis points in September.
The probability of an October rate cut climbed to 88.2% as of 10:30 a.m. ET following the retail sales report, up from 73.8% on Oct. 15, according to the CME Group's FedWatch tool.
"With the recent deterioration in consumer confidence and broad-based declines across various types of merchants, this report is the first hard data to indicate cracks in one of the key pillars of the economy that, so far, had been holding up rather well," Tim Quinlan, senior economist at Wells Fargo Securities wrote.
In September, sales of motor vehicle and parts fell 0.9% month over month while sales in clothing and clothing accessories stores climbed 1.3%. Sales in gasoline stations declined 0.7%.
Excluding motor vehicle and parts stores and gasoline stations, sales were flat in the month, compared with market expectations of 0.3% growth.
On an annual basis, retail and food services sales registered a 4.1% increase in September while the retail trade sales segment recorded a 4.0% rise.