* Retail sales fall 0.3 percent, first decline since June
* Autos, building materials account for bulk of decline
* Wholesale prices fall 0.2 percent, first drop since May
* Core PPI falls 0.2 percent, largest drop in two years
By Lucia Mutikani
WASHINGTON, Nov 14 U.S. retail sales fell in
October for the first time in three months as superstorm Sandy
slammed the brakes on automobile purchases, suggesting spending
lost momentum early in the fourth quarter.
Other data on Wednesday showed wholesale prices falling last
month for the first time since May, giving the Federal Reserve
latitude to maintain its ultra-easy monetary policy stance.
Retail sales dipped 0.3 percent after a 1.3 percent increase
in September, the Commerce Department said. Economists had
expected sales to fall 0.2 percent.
"Sandy was a drag, but I expect we will see a gain in sales
in November," said Gus Faucher, a senior economist at PNC
Financial Services Group in Pittsburgh.
Part of the drop in sales was payback after two straight
months of solid gains. It could also be a sign of hesitation
among consumers facing the prospect of higher taxes next year.
Even excluding autos, retail sales were flat last month.
Automatic tax hikes and government spending cuts will siphon
about $600 billion from the economy next year if Congress fails
to act to avert them. This so-called fiscal cliff has already
eroded business confidence.
"It's imperative that policymakers address the looming
fiscal cliff now to give consumers some certainty heading into
the holiday shopping season," said Matthew Shay, president of
the National Retail Federation.
Car makers blamed Sandy, the monster storm that lashed the
densely populated East Coast and caused up to $50 billion in
damage, for the abrupt pullback in sales last month.
Automakers said traffic at East Coast dealerships slowed as
residents began to brace for the storm, which hit at the end of
the month. Sales tend to build up late in the month, which
likely amplified the impact.
Ford Motor Corp estimated the industry lost sales of
20,000 to 25,000 vehicles, while Toyota put the loss at
The Commerce Department said it had received indications
from companies that the storm had both positive and negative
effects on retail sales overall, but was unable to quantify
Motor vehicle sales declined 1.5 percent, the largest fall
since August last year, after increasing 1.7 percent in
September. Excluding autos, retail sales were unchanged last
month after advancing 1.2 percent in September.
The storm also likely dented sales at clothing stores, but
probably boosted receipts at food and beverage stores.
Economists expect the storm could shave as much as half a
percentage point from economic growth in the fourth quarter.
However, any lost activity should be made up early next year.
"That will come back in the first quarter. Spending on
rebuilding will filter into growth numbers gradually over a
number of quarters," said Julia Coronado, chief North America
economist at BNP Paribas in New York.
Separately, the Labor Department said its producer price
index slipped 0.2 percent last month, the first decline since
May. The index had increased 1.1 percent in September.
Economists had expected prices received by farms, factories
and refineries to increase 0.2 percent last month.
Excluding volatile food and energy costs, wholesale prices
also fell 0.2 percent, the largest drop since October 2010.
The fall in this core gauge was tied to the introduction of
new motor vehicle models, which can skew the data. Excluding
autos, the core PPI was flat, consistent with a benign inflation
environment, which should suit the Fed's accommodative policy.
Minutes of the U.S. central bank's Oct. 23-24 meeting showed
a number of officials thought the Fed should step up asset
purchases next year to support the economy through low borrowing
U.S. financial markets were little moved by the economic
reports. Stocks on Wall Street were down as investors
fretted about the fiscal cliff and Europe's ongoing problems.
U.S. Treasury debt prices were mostly up, while the
dollar fell against the euro.
BROAD WEAKNESS BEYOND STORM
Even accounting for Sandy's impact, the retail sales report
highlighted the sluggishness of domestic demand.
So-called core retail sales, which exclude autos, gasoline
and building materials and which correspond most closely with
the consumer spending component of GDP, fell 0.1 percent. They
had increased 0.9 percent in September.
The drop suggested consumer spending slowed early this
quarter after ending the July-September period on a solid
Building materials and garden equipment sales fell 1.9
percent, while sales of electronics and appliances fell 1.0
percent, unwinding some of the prior month's boost from
purchases of Apple's iPhone 5.
Receipts at gasoline stations surprisingly rose 1.4 percent
last month, despite pump prices falling almost 10 cents.