Retail Sales Up Solidly but Less Than Expected

Shoppers spent at a healthy rate in August, underpinning forecasts of faster growth, but consumer sentiment softened in recent weeks amid concerns over layoffs, reports released Friday showed.

A third report showed wholesale prices largely subdued.

U.S. retail sales rose a weaker-than-expected 0.6% last month, the Commerce Department said.

Separately, the University of Michigan’s gauge of consumer confidence slipped to a preliminary 88.2 in September from August’s final reading of 89.3, market sources said.

Economists said the sales report suggested the economy still was on track to grow at a strong 4.5% annual pace or better in the current quarter, but investors were disappointed. Wall Street forecasters had expected a heftier 1.4% sales gain and a rise in consumer sentiment.

The government said the dollar value of auto sales rose just 0.5% last month, after soaring 2.4% in July. The latest gain contrasted with reports from automakers, who said unit sales surged about 10%.

Economists said the discrepancy in the auto data probably reflected aggressive sales incentives that lowered prices.

Excluding auto sales, retail sales rose 0.7% last month.

In its report on wholesale prices, the Labor Department said the producer price index for August rose 0.4%. But the core PPI, which strips out volatile food and energy costs, rose just 0.1% after a 0.2% rise in July, underscoring a lack of underlying price pressures.

The reports will garner close attention from Federal Reserve officials, who gather Tuesday to plot interest-rate strategy. The Fed is expected to leave its key short-term rate unchanged.