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Retail sales came in a little lighter than expected in August, the Commerce Department said, as the specter of rising interest rates started to weigh on more than just the real-estate market.

Meanwhile, a separate report gave more evidence the threat of deflation has passed.

Overall retail sales rose 0.6% during the month to $319 billion. Excluding the impact of auto sales, sales rose 0.7%. Both numbers were shy of economists' estimates, especially the overall gain, which came in at about half what analysts were projecting.

Contributing to the weak number was an anemic rise in sales at car dealerships and auto parts stores and a 0.2% decline in sales of building materials, reflecting the cooling housing market. Sales of building materials rose 7.7% in 2002.

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Furniture and home furnishing stores did $8.48 billion of sales in August compared with $8.42 billion in July, while clothes retailers had sales of $14.8 billion compared with $15.0 billion and general merchandisers had sales of $40.4 billion compared with $40.0 billion.

Separately, the Labor Department said the producer price index rose 0.4% in July, about a tenth of a point more than economists forecast. The core number, which excludes food and energy, rose 0.1%.