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Oct. 16, 2019, 10:18 a.m. EDT

U.S. retail sales snap 6-month win streak in September as receipts fall 0.3%

Sales decline in September for most retailers after strong summer

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By Jeffry Bartash, MarketWatch


Bloomberg News/Landov
Auto dealers sold a lot of new cars in September, but broad discounts led to lower receipts. That contributed to the first decline in U.S. retail sales in seven months.

The numbers: Sales at U.S. retailers fell in September for the first time in seven months as most stores posted lower receipts, signaling that a widely expected slowdown in consumer spending might under way.

Retail sales fell 0.3% last month, the government said Thursday, ending a streak of six straight strong gains that helped to fuel economic growth in the middle of the year.

Economists polled by MarketWatch had expected a 0.3% increase.

Retail sales were flat if gasoline and auto dealer receipts are excluded, but the overall report was still quite weak.

Partly mitigating the soft September report: Retail sales in August were raised to a 0.6% increase from an original 0.4% reading.

What happened: Sales fell almost 1% at auto dealers even though they reported a strong increase in the number of new vehicles sold. The drop-off likely reflects end-of-summer discounting and more corporate-fleet sales.

Sales also declined 0.7% at gas stations, reflecting lower prices at the pump. Autos and gas represent an outsized portion of overall retail sales.

The softness was widespread, however. Sales also fell at home centers, department stores and internet retailers. The drop in Internet sales was the first this year.

The only segment of the retail industry to record strong sales were health stores and pharmacies.

Read: U.S. adds 136,000 jobs in September, unemployment rate hits 50-year low

What might have contributed to weaker sales is the monthlong strike at General Motors /zigman2/quotes/205226835/composite GM -1.73%  that has idled tens of thousands of workers in several large Midwestern states such as Michigan and Ohio. The strike is expected to end soon, perhaps as early as this week.

Big picture: Household spending is keeping the wheels of the U.S. economy turning even as many countries around the world confront slower growth, but the torrid pace of retail sales during the spring and summer was unlikely to persist.

The big question is how much consumer spending wanes, especially with businesses largely sitting on the sidelines. The trade war between the U.S. and China has disrupted global supply chains, upset business-investment plans and caused executives to hunker down until the dispute is resolved.

So long as consumers do their part, the U.S. is likely to avoid recession. The Federal Reserve’s decision to cut interest rates also appears to have given parts of the economy like the housing industry a boost.

What they are saying? “With employment growth cooling and private sector confidence increasingly susceptible to policy uncertainty, we anticipate a further slowdown in consumer outlays heading into 2020,” Economists Gregory Daco and Lydia Boussour of Oxford Economics told investors in a note.

“Consumption is poised to cool along with slower job gains ahead, and the Fed will be looking closely for any signs of trade uncertainty contaminating the most important segment of the U.S. economy,” said economist Katherine Judge of CIBC Capital Markets. “ However, lower interest rates and ample savings to draw from should allow household spending to remain absolutely healthy for now.”

Market reaction: The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.20% and S&P 500 /zigman2/quotes/210599714/realtime SPX -0.16% fell in Wednesday trades. Stocks have been rising recently on hopes of a U.S.-China trade deal, but doubts linger. The weak retail report added to the negative tone.

The 10-year Treasury yield /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y +0.20% slipped to 1.76%.

/zigman2/quotes/205226835/composite
US : U.S.: NYSE
$ 34.67
-0.61 -1.73%
Volume: 14.38M
Nov. 21, 2019 6:30p
P/E Ratio
5.65
Dividend Yield
4.38%
Market Cap
$50.41 billion
Rev. per Employee
$849,994
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/zigman2/quotes/210598065/realtime
US : Dow Jones Global
27,766.29
-54.80 -0.20%
Volume: 232.02M
Nov. 21, 2019 4:58p
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/zigman2/quotes/210599714/realtime
US : S&P US
3,103.54
-4.92 -0.16%
Volume: 1.86B
Nov. 21, 2019 4:58p
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/zigman2/quotes/211347051/realtime
add Add to watchlist BX:TMUBMUSD10Y
BX : Tullett Prebon
1.78
+0.0035 +0.20%
Volume: 0.00
Nov. 22, 2019 3:35a
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Jeffry Bartash is a reporter for MarketWatch in Washington.

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