US consumers rein in spending as retail sales slump
Fears are mounting over the state of the world’s largest economy after the Commerce Department revealed that US retail sales fell 0.3% in August.
This is the second consecutive month that sales have declined after July’s figure was revised from 0.1% to 0.5%.
The weak August figure was a shock to analysts who had forecast a rise of 0.3%. One analyst at the Bank of Japan-Mitsubishi said it seems consumer spending is retrenching, not only retrenching but digging a new hole.
Last month, petrol sales fell 2.5% – this represents the largest monthly decline since mid-2007. Meanwhile, sales of building materials, clothing and electronics were all slower in August than they were in July.
However, there was an increase in the sales of cars and other vehicles which rose 1.9% in August, this was the first increase since January following a 4.3% decline in July.
The most recent US economic growth data showed that the economy grew at an annual rate of 3.3% in the three months from April to June, however, the majority of this growth was due to American exporters.
One analyst said he would be very surprised to see consumer spending in positive territory in the third quarter.
Meanwhile, it is expected that the US Federal Reserve will cut interest rates next week. Last month, the Fed left interest rates unchanged at 2% after aggressive cuts in late 2007 and early 2008.