Flurry of tepid data could delay rate hike
WASHINGTON » U.S. factory output fell, consumers cut back at retailers and wholesale prices went nowhere in August, the latest evidence of a less-than-robust economy. The weak numbers could give the Federal Reserve further reason to hold off on raising interest rates when it meets next week.
“All the data seem to say the same thing: Not much is happening in the economy,” said Joel Naroff of Naroff Economic Advisors. “We have no inflation, not a lot of consumer spending, not much production ... The data don’t demand that the Fed do anything right now.”
The Fed reported Thursday that factory production fell 0.4 percent last month. Overall industrial production — which combines manufacturing, mines and utilities — dropped by an identical amount.
A second report Thursday suggested that the factory weakness may be extending into September. The Federal Reserve Bank of New York said that manufacturing in New York shrank in September for a second straight month. New orders and shipments fell sharply.
Earlier this month, a survey by the Institute for Supply Management showed that U.S. manufacturing contracted in August for the first time since February. Still, the Philadelphia Fed reported Thursday that its manufactur-
ing gauge climbed in September for a second straight month, suggesting greater factory output in the mid-Atlantic region.
In reporting its closely watched measure of retail
spending, the Commerce Department said that retail sales fell in August for the first time in five months. Consumers spent less on building materials, furniture
and cars. Americans did spend more at clothing retailers, restaurants and bars.
“They were buying Tshirts and eating out — and that was about it,” Naroff said.
Noting the slide in retail sales, Barclays Research downgraded its forecast for U.S. economic growth from July through September to an annual rate of 2.6 percent from 2.8 percent earlier.
“The report was soft across the board,” Barclays economists said in a research report.
The Fed will meet Tuesday and Wednesday, after which it will announce whether it will resume raising interest rates. In December, it raised its benchmark short-term rate from a record low, where it had been since the depths of the 2008 financial crisis, but hasn’t increased it since then.
In recent days, some Fed policymakers have said a rate hike should be considered next week. But given recent lackluster economic reports, investors peg the chances of a September rate hike at just 12 percent, according to figures from the CME Group.