US retail sales rise, factory output slows

U.S. retail sales rebounded moderately in October although consumers did cut back on purchases of big-ticket household items like furniture and discretionary spending, which could temper expectations for a strong holiday shopping season.

Signs from the Commerce Department report on Friday that consumer spending was slowing faster than economists had expected, and news that production at factories tumbled again in October, revived concerns about a downshift in the economy, which had receded after a recent raft of fairly upbeat data.

Economists slashed their economic growth estimates for the fourth quarter following Friday's reports.

"The consumer is still spending, but not robustly enough to support other sectors, especially business investment," said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.

Federal Reserve Chairman Jerome Powell on Thursday told lawmakers that "the U.S. economy is the star economy these days," compared to other advanced economies and "there's no reason that can't continue."

The U.S. central bank signaled last month that it will probably not cut interest rates again in the near term.

Retail sales gained 0.3% last month. But the increase in sales, which reversed September's unrevised 0.3% drop, reflected higher motor vehicle and gasoline prices.

Economists polled by Reuters had forecast retail sales climbing 0.2% in October after falling in September for first time in seven months. Auto manufacturers reported a drop in unit sales in October.

Compared to October last year, retail sales advanced 3.1%. Excluding automobiles, gasoline, building materials and food services, retail sales increased 0.3% last month. Data for September was revised lower to show the so-called core retail sales slipping 0.1% instead of being unchanged as previously reported.

Core retail sales correspond most closely with the consumer spending component of gross domestic product.

"We have long been anticipating a slowdown in consumer spending but it appears to have happened more significantly than we had expected," said Daniel Silver, an economist at JPMorgan in New York.

Based on the latest data, economists estimated that consumer spending, which accounts for more than two-thirds of the economy, could grow at around a 1.5% annualized rate in the fourth quarter.

That would be a step-down from the 2.9% pace notched in the JulySeptember period.

U.S. financial markets were little moved by the data as investors watched news on trade negotiations between the United States and China. The dollar fell against a basket of currencies.

U.S. Treasury prices slipped, while stocks on Wall Street were trading higher. Consumer spending is being supported by the lowest unemployment rate in nearly 50 years.