By Nick Timiraos and Josh Mitchell 7:30amCDT
Retail Sales Up But…
WASHINGTON--Spending at U.S. retailers ticked up in August, a sign that lower gasoline prices and better job
growth may be encouraging consumers to open their wallets. Retail and food sales rose 0.6% from July to a
seasonally adjusted $444.4 billion, the Commerce Department said Friday. Excluding automotive purchases, sales rose
0.3% from July. Excluding both autos and gasoline, sales rose 0.5% in August. Economists surveyed by The Wall
Street Journal had forecast overall retail sales would rise 0.7% in August. They had predicted a 0.2% gain excluding
autos.
Another bright spot: the report revised up earlier figures that had pointed to possible summer spending lull. Retail
sales in July rose 0.3% from June, versus an initial reading that showed no change. Total retail sales were up 5% in
August from a year earlier. Sales were up for an array of retailers and restaurants in August, though spending at
department stores ticked down. Sales of building materials rose 1.4%, the largest monthly gain since April, while sales
at furnishing and appliance stores rose 0.7%. Sales at gasoline stations were down 0.8% from July and for the first
eight months of the year are running 1.2% below last year's level.
Friday's report could buoy expectations of strong economic growth during the third quarter following an uneven first
half of the year. Personal consumption spending accounts for more than two thirds of output.
Economists surveyed this week by the Wall Street Journal expect the economy to grow at a 3% annual rate in both the
third and fourth quarters. The economy expanded at a 4.2% rate during the second quarter after contracting at a 2.1%
rate during the first quarter, according to the Commerce Department.
While the economy has added more than 200,000 jobs on average through the first eight months of the year, wages
haven't posted big increases and inflation remains below the Federal Reserve's target of 2%. Auto sales have been one
of the biggest bright spots for the economy this year, as Americans take advantage of easier credit and low rates to
replace aging vehicles. Home sales have improved in recent months after a slowdown late last year, but they are still
running below last year's pace. The Commerce Department's retail sales report can be found at
http://www.census.gov/retail/marts/www/marts_current.pdf (END) Dow Jones Newswires
By Josh Mitchell and Nick Timiraos 7:30amCDT
Import Prices Down
WASHINGTON-Prices of imported goods fell sharply in August, a sign cheaper oil is helping keep a lid on inflation
in the U.S. Import prices fell 0.9% from July, matching the biggest decline since June 2012, the Labor Department
said Friday. The drop fell in line with the forecast of economists surveyed by The Wall Street Journal.
Compared to a year earlier, prices fell 0.4%, ending three months of year-over-year gains. Import prices have dropped
for two straight months largely due to a global glut of oil and weak economic demand that has brought down
petroleum prices. Crude oil prices have eased after a run-up earlier this summer linked to turmoil in the Middle East.
The price of imported petroleum fell 4.4% last month, the biggest drop since November. Excluding petroleum, prices
fell 0.1% but were up 0.8% from a year earlier. That marked the largest 12-month advance since the year ended in
March 2012.
The drop in fuel prices has led to falling gasoline prices, which could give consumers more money to spend on other
items. That could boost the nation's retailers. Car import prices climbed 0.1% in August from July. Food prices rose
0.6%. Capital and consumer goods prices were flat. Meanwhile, natural gas prices fell 11.6% and have fallen 13%
over the past three months but were still up sharply over the past year. Prices for industrial supplies fell.
Friday's report is the latest sign inflation in the U.S. remains tame, reflecting sluggish economic growth. Weak price
growth is likely to reassure the Federal Reserve as it winds down its bond-purchasing program and plots when to raise
short-term interest rates.
The Fed is scheduled to hold a policy meeting next week at which it will likely discuss further when and how to raise
short-term interest rates, which have been pinned near zero since the recession as a tool to kick-start the economy.
The Fed has so far held off on raising rates in part because inflation has remained so low, allowing the central bank to
train its focus on stimulating employment and economic growth. Most Fed officials expect to start raising rates in
2015. Other measures also point to subdued inflation. The Fed's preferred gauge, the Commerce Department's
price index for personal consumption expenditures, climbed 1.6% in July from a year earlier. That index has
run below the Fed's 2% target for 27 straight months. The Labor Department's consumer-price index climbed
2% in July from the prior year. The Labor Department report on import and export prices can be accessed at:
http://www.bls.gov/news.release/ximpim.toc.htm (END) Dow Jones Newswires
By Nirmala Menon 7:30amCDT
CAD Household Debt Up Again
OTTAWA--A key gauge of Canadian household debt rose in the April through June period for the first time in three
quarters as debts grew faster than incomes. The ratio of household credit market debt to personal disposable income
in the second quarter climbed to 163.60% from 163.13% in the first quarter, Statistics Canada said Friday.
In other words, Canadians owe roughly 1.64 Canadian dollars ($1.49) on every dollar of disposable income.
The data underscore recent signals of concern from Canada's central bank. Last week, the Bank of Canada's interest
rate statement omitted previous references to a "constructive" evolution of household imbalances, its code for
stretched household balance sheets and lofty home prices. Write to Nirmala Menon at nirmala.menon@wsj.com
(END) Dow Jones Newswires
8:38 EDT 7:38amCDT
Treasury Reaction
Bond prices hit fresh session lows after mixed retail sales. The headline number showed 0.6% growth, a tad below
0.7% forecast by economists, though excluding automotive purchases, sales rose 0.3% from July, vs 0.2% forecast.
The key focus is the FOMC meeting next week and any changes in the Fed's language regarding how long it will hold
rates near zero could send bond yields higher still. The 10-year Treasury note was 15/32 lower, yielding 2.589%.
(min.zeng@wsj.com; @minzengwsj) (END) Dow Jones Newswires
By Andrey Ostroukh and Tommy Stubbington 7:39amCDT
Oh Ivan!
MOSCOW--The ruble tumbled to a fresh all-time low Friday after the Bank of Russia decided to keep interest rates
unchanged, blaming accelerating inflation on Western sanctions. The political confrontation between Moscow and the
West has fueled consumer price growth in Russia this year, ruining the central bank's plan to rein in inflation before
switching to an inflation-targeting policy from 2015. The Bank of Russia has already raised rates three times this year,
which should have curbed inflation with a lag of a few months. But the rate increases have done little to arrest a
slump in the Russian currency, which fell to a record low of 37.938 following the rate announcement.
Most analysts had expected the central bank to stay on hold, although a minority were tipping a further rate hike.
Foreign investors are shying away from Russian assets amid political uncertainty stemming from the conflict in
Ukraine and a weakening economy, analysts say. "I don't think a rate hike would have done all that much to support
the ruble. Even when this crisis [in Ukraine] comes to some kind of conclusion, ruble assets will trade with a higher
risk premium to reflect political worries," said Peter Kinsella, a foreign-exchange strategist at Commerzbank.
The Bank of Russia, which had initially planned to keep inflation within a range of 3.5%-6.5%, said Friday that
inflation was likely to remain above 7% by the end of the year.
After Moscow's ban on food imports from countries that sanctioned Russia, annual inflation sped up from 7.5% seen
in July and reached 7.7% as of Sept 8. But the central bank said it is confident that current monetary policy would
bring inflation to the midterm target of 4%. Should that not be the case, however, the central bank would continue
tightening its policy after having raised rates by a cumulative 150 basis points since March. "If inflationary
expectations anchor at elevated levels and there is a risk that inflation will exceed the target in the midterm, the Bank
of Russia may continue raising the key rate," the central bank said. On Friday, the central bank kept the key rate at
8%. The one-day deposit rate, an effective floor for money market rates, was 7%, and the one-day repurchase
agreement rate stayed at 9%. Write to Andrey Ostroukh at andrey.ostroukh@wsj.com and Tommy Stubbington at
tommy.stubbington@wsj.com (END) Dow Jones Newswires
By Nicole Friedman 8:58amCDT
Oil Prices Slump
NEW YORK--Oil prices declined Friday as market participants continued to focus on weak demand, though prices
bounced slightly on renewed geopolitical concerns in overnight trading. Light, sweet crude for October delivery
recently fell 19 cents, or 0.2%, to $92.64 a barrel on the New York Mercantile Exchange. Brent fell 44 cents, or 0.5%,
to $97.64 a barrel on ICE Futures Europe, on track to settle at a fresh 2014 low.
Oil prices have slumped in recent weeks on concerns that demand is insufficient to absorb ample global supplies.
Those fears were reinforced this week as three forecasting agencies--the U.S. Energy Information Administration, the
Organization of the Petroleum Exporting Countries and the International Energy Agency--all cut their projections for
oil-demand growth. Prices bounced higher in overnight trading on concerns about geopolitical threats to oil supplies.
The European Union strengthened sanctions against Russia's oil sector Friday, and the U.S. was set to announce its
own sanctions. Though the measures aren't expected to affect current Russian oil exports, they could limit the
country's future production capacity by cutting off access to financing and foreign investment. There are also concerns
that Russia could retaliate with its own sanctions. "Geopolitics are once again providing swings in the petroleum
sector," said Phil Flynn, analyst at the Price Futures Group, in a note. However, Commerzbank in a note, concerns
about weak demand for oil products still drive the market. "It would still be premature to talk of a trend reversal, for
the latest price slide was due first and foremost to a gloomier demand outlook," the bank said. Front-month October
reformulated gasoline blendstock, or RBOB, ticked up 0.4 cent at $2.5245 a gallon. October diesel slid 0.87 cent, or
0.3%, to $2.7474 a gallon. Write to Nicole Friedman at nicole.friedman@wsj.com (END) Dow Jones Newswires
9:00amCDT
Consumer Confidence Rises
U.S. consumers' optimism about economy is at its brightest in over a year, according to data released Friday.
The Thomson-Reuters/University of Michigan mid-September sentiment index rose to 84.6 from a final-August result
of 82.5, according to a source who has seen the numbers. The latest reading is the highest since July 2013.
Economists surveyed by The Wall Street Journal expected a preliminary September index of 83.0.
The report said early-September gains were largely driven by an increase in consumers' expectations about the
economy. The expectations index jumped to 75.6 from a final-August result of 71.3. The current conditions index
slipped to 98.5 from 99.8, which had been the highest since July 2007. "Consumer confidence and sentiment indices
are in a solid uptrend and are well off their recession lows, but absolute levels of these measures are still well below
the highs reached before the credit bubble burst," said Joshua Shapiro, chief U.S. economist at MFR Inc. "Labor
market conditions will continue to dominate the outlook for consumer spending." A separate report Friday morning
showed spending at U.S. retailers picking up last month, up 0.6%. While it offered an encouraging sign of consumers
opening up their wallets, the pattern in spending could be held in check if wages don't rise faster. Within the Michigan
survey, inflation expectations edged lower. The one-year inflation expectation reading in mid-September slipped to
3.0% from 3.2% in late-August. Inflation expectations covering the next five to 10 years edged down to 2.8% from
2.9%. Write to Cynthia Lin at cynthia.lin@wsj.com (END) Dow Jones Newswires
BOSTON, Sept 12 (IFR) 9:00amCDT
Inventories Up
The July business inventories release offered little surprise, with overall inventories up 0.4% (as expected) and June
inventories up an unrevised 0.4%. Sales rose 0.8%, up from June's +0.6% (revised up from +0.3%). The sales revision
is a nice boost, but was already accounted for in positive revisions to factory shipments and wholesale sales.
The inventories / sales ratio edged down to 1.287 from 1.291, the very slight decline putting it at its lowest since
November. It remains a little above the 1.278 average of the last four years, but not enough so to suggest more than
the tiniest inventory overhang, and so should not represent a drag on production. There were notable variations by
sector, however, as the retail I/S ratio rose to a relatively high 1.426 from 1.417, the wholesale ratio slipped to a
somewhat low 1.164 from 1.171, and the factory ratio dropped to an average 1.289 from 1.302, with the factory ratio
having been extremely steady over the past four years.
Gains in wholesale and factory inventories had already been reported as up 0.1% each. The final ingredient, retail
inventories, came in at +1.0%, the biggest jump since last October. Year-on-year growth in inventories rose to +5.9%
from +5.8%, its fastest pace since September 2012, while y/y growth in sales rose to +5.3% from +5.0%, only its
fastest since April. Sales rebounded strongly after weakness in early winter, but inventories gains have been very
consistent, recording gains of 0.4% or 0.5% in eight of the last nine months. Theodore.Littleton@thomsonreuters.com
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