The retail sales numbers for August aren't as good as some previous months -- but that's not a shock, and probably won't have much of an effect on the Federal Reserve's decision on interest rates next week.
Sales dropped 0.3% in August, the Census Bureau said this morning, dragged lower by a 0.9% decline in auto revenue that major manufacturers have previously reported. That missed the median forecast of a 0.1% decrease in a survey conducted by The Wall Street Journal.
"This is just a disappointing report," said Joel Naroff, president of Naroff Economic Advisors in Holland, Pa. "Another report that fails to force the Fed to do anything, if the Fed members were looking for a reason to raise rates."
While the weakest sectors were cars and gas, retail sluggishness was broad, even affecting online businesses like Amazon (AMZN - Get Report) . Building supply stores such as Home Depot (HD - Get Report) and Lowe's (LOW - Get Report) , which have been on a cyclical tear, dropped 1.4%. Furniture retailers like Ethan Allen (ETH - Get Report) and Restoration Hardware (RH - Get Report) slipped 0.7%.
"Summer went out with a whimper, not a bang," Richard Moody, chief economist at Regions Financial, said of today's report. "There are price effects in play, so real spending will look better than this."
While "the report commands attention," he added, "we're not sure exactly what it's telling us.''
Electronics retailers like Best Buy (BBY - Get Report) eked out a 0.1% gain, while drug stores such as CVS Health (CVS - Get Report) saw a 0.1% dip. Sales at clothing retailers increased 0.7%, and revenue at bars and restaurants climbed 0.9%. Consumers have been racking up purchases in recent months, with car buying near record levels, so a cooling-off period isn't a shock, High Frequency Economics chief U.S. economist Jim O'Sullivan said before the report.
The lower sales number is "due largely to volatility in the auto segment, rather than a change in the trend," O'Sullivan wrote in a note to clients.
"We estimate the data are consistent with total real consumption, including services, rising at a 3% annual rate so far in the third quarter, down from the strong 4.4% pace in the second quarter, but still solid," he said after the data were released.
The lackluster retail figures arrived in tandem with weaker-than-expected data on industrial production, which fell 0.4% in August.
"If the Fed moves, it will clearly NOT be because of the data," Naroff said. "If they are indeed data-driven, as they say they are, they have missed another opportunity."
Indeed, markets have largely discounted a September rate hike already. The CME Group's FedWatch tool puts the chances of a hike at next week's meeting at only 12%, down sharply in the last week.
The markets have taken note of relatively dovish remarks by monetary policy committee members Lael Brainard and Daniel Tarullo, which indicated that more-hawkish members like Vice Chair Stanley Fischer would have trouble assembling broad-based support for a quarter-point hike in the benchmark short-term interest rate.
Futures prices point to about a 54% chance of a hike in December, as the Fed juggles the views of members who want to see rates rise gradually as the economy improves and those who point to low inflation and international weakness as reasons to keep rates at current levels of 0.5% or lower.
Interest rates, which were cut to nearly zero to buoy the economy during the 2008 financial crisis, have now been below 1% for eight years, curbing interest income at banks from JPMorgan Chase (JPM - Get Report) to Bank of America (BAC - Get Report) . A 25 basis-point hike last December has been the only change in the period, with the central bank quickly backing away from projections that it might raise rates as many as four times this year.