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INSTANT VIEW: Retail sales, producer prices fall in Sept

NEW YORK (Reuters) - Sales at U.S. retailers posted the biggest monthly decline in more than three years in September, according to a government report on Wednesday that showed consumers struggling to cope with falling home and stock prices.

U.S. wholesale prices dropped 0.4 percent in September, the government said on Wednesday, in line with expectations as another fall in energy costs eased price pressures.

KEY POINTS:

RETAIL SALES * Sales fell 1.2 percent last month to a seasonally adjusted $375.5 billion, after a revised 0.4 percent drop in August, previously reported as a 0.3 percent decline. The September decline was the sharpest since August 2005, when sales fell 1.4 percent. * Economists polled by Reuters had expected a 0.7 percent decline for September. * Excluding autos, retail sales were off 0.6 percent for the month, double the 0.3 percent decline that economists had forecast.

PPI * The Labor Department’s Producer Price Index, which measures prices at the farm and factory gate, fell for the second straight month. Analysts polled by Reuters had expected the index to drop 0.4 percent in September after falling 0.9 percent in August. * Core prices, which strip out volatile food and energy costs, rose by a surprising 0.4 percent. Analysts had expected only a 0.2 percent rise, the same as in August. * Energy prices fell 2.9 percent in September after tumbling 4.6 percent in August, which was the biggest drop in nearly two years.

COMMENTS:

SCOTT BROWN, CHIEF ECONOMIST, RAYMOND JAMES & ASSOCIATES, ST

PETERSBURG, FLORIDA:

“The retail sales numbers were really disappointing. There was much sharper weakness than people were looking for and that should weigh on stocks and support Treasury bonds.

“The Empire State record low for new orders is obviously not good. This ties back into a lot of the credit difficulties with small and medium sized firms we have been reading about.

“These reports indicate the recession is maybe a bit sharper than people had anticipated.”

KATHY LIEN, DIRECTOR OF CURRENCY RESEARCH, GFT FOREX, NEW

YORK:

“We are beginning to see dollar/yen trickle lower and the key number is the retail sale report because it is the weakest since August 2005. It really highlights the problems we are seeing in the U.S. economy because retail sales are a leading indicator for GDP. It is a very big component of GDP. So far, GDP releases we have seen have not turned into significantly negative territory. The last GDP number showed growth of 2.8 percent. The question on everyone’s minds is how deep of a recession. Today’s number indicates a very strong chance of negative GDP growth for the third quarter and would certainly pave the way for another 25 to 50 basis points of easing over the next few months and the PPI number confirms that as inflation is coming down as well.”

MARKET REACTION: STOCKS: U.S. equity index futures extend losses BONDS: Treasury debt prices add to gains DOLLAR: U.S. dollar extends losses versus yen RATE FUTURES: Fed fund futures rise, boosting implied chance of 50 basis point rate cut in October

OTHER DATA FROM OCT 15:

US mortgage applications rise on refinancing - MBA

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