WRAPUP 4-Flat retail sales keep U.S. on recession watch

Wed Sep 14, 2011 5:21pm EDT

Related Topics

 * Retail sales flat in Aug; Producer prices unchanged
 * Economy perilously close to recession
 * Core retail sales up 0.1 percent
 * Excluding food and energy, PPI up 0.1 pct
 (Updates with market close, CEO comment)
 By Jason Lange
 WASHINGTON, Sept 14 (Reuters) - Growth in U.S. retail sales
stalled in August after a spending battle in Congress crushed
consumer sentiment, leaving the economy perched uncomfortably
close to recession.
 The weak data puts more pressure on the U.S. Federal
Reserve to try to boost growth, while a report showing flat
wholesale prices in August could support arguments within the
central bank to take action.
 "The slowdown in the economy is real," said Steven
Ricchiuto, chief economist at Mizuho Securities in New York.
"It's a broad-based slowdown, and that's pivotal."
 Retail sales were unchanged last month from July, the
Commerce Department said on Wednesday. The government also
lowered previous estimates for growth during June and July.
 The data was the latest hard evidence the United States is
flirting with recession. Other reports have shown there was no
employment growth in August, while claims for jobless benefits
rose in early September.
 Consumer confidence plunged last month after a battle over
the deficit slammed stock prices and pushed the nation to the
brink of default. The country's debt was then downgraded.
 "The consumer reacted to the debt ceiling (fight), the
downgrade and the equity market swoon by basically hunkering
down and not spending," said Tom Porcelli, senior U.S.
economist at RBC Capital Markets in New York.
 Citing the weak data, Nomura cut its forecast for
third-quarter U.S. economic growth to 2.4 percent from 2.6
 However, major U.S. stock indexes shook off the data and
closed higher after European leaders showed new urgency in
efforts to contain the euro zone debt crisis.
 U.S. economic growth slowed sharply during the first half
of the year. That has left the economy vulnerable to shocks
like an escalation of Europe's woes, and U.S. Treasury
Secretary Timothy Geithner urged the continent on Wednesday to
move more aggressively to solve its troubles. [ID:nS1E78D0FH]
 INSTANT VIEW - retail sales, PPI: [ID:nnS1E78D0AE]
 POLL-Chances of a recession increasing: [ID:nS1E78C0RE]
 Graphic -  U.S. retail sales: r.reuters.com/syk73s
 Graphic - U.S. mortgages: r.reuters.com/tuk73s
 Consumer spending accounts for about two-thirds of U.S.
economic activity, and the retail sales figures showed spending
during the first two months of the third quarter was weaker
than many forecasters expected.
 An increase in sales of electronics, gasoline and food was
balanced by drops in purchases of cars, furniture and clothes.
Spending at restaurants and bars also dipped.
 A gauge that hews most closely to the measure the
government uses in calculating GDP rose just 0.1 percent.
 A Reuters poll released on Wednesday found economists see a
nearly one-in-three chance the United States could re-enter
recession. Many economists expect the Fed will unveil new
measures to boost growth next Tuesday following a two-day
 U.S. households still feel the pain from the country's
2007-2009 recession. A report on Tuesday showed the U.S.
poverty rate -- already the highest in the developed world --
rose last year to 15.1 percent, its highest level since 1993.
 Companies are also feeling the pinch. Best Buy Co (BBY.N)
cut its profit outlook for the year on Tuesday, citing economic
 Policymakers are struggling to counter the weakness.
 President Barack Obama is lobbying Congress to approve his
recently unveiled job stimulus program but opposition
Republicans have harshly criticized parts of the plan.
 Fed Chairman Ben Bernanke has hinted at further monetary
stimulus, although three policymakers within the central bank
last month dissented over a pledge to keep interest rates low
into 2013.
 A separate report on Wednesday from the Labor Department
showed prices received by U.S. producers were unchanged in
August, held down by a drop in energy costs. That could help
keep inflation from being an immediate roadblock to further
monetary stimulus.
 Another report from the Commerce Department showed U.S.
business inventories rose slightly less than expected in July,
suggesting firms remained cautious about future demand.
 "The economy will be sluggish for long time to come," Toys
R Us CEO Jerry Storch told reporters in New York.
 (Additional reporting by Mark Felsenthal in Washington and
Richard Leong, Emily Flitter and Dhanya Skariachan in New York;
Editing by Andrea Ricci, Neil Stempleman and Dan Grebler)
 (jason.lange@thomsonreuters.com; +1 202 310 5487; Reuters
Messaging: jason.lange.reuters.com@reuters.net))