Modest hike in retail sales

Retail sales rose by a sluggish 0.2% in October and producer prices edged up slightly, according to data Wednesday that might give the Federal Reserve more leeway to prop up a slowing economy.

The modest retail sales gain reported by the Commerce Department matched economists’ expectations as a housing downturn and steep oil prices restrained consumer spending.

Separately, the Labor Department said the producer price index, a gauge of prices paid at the farm and factory gate, rose 0.1% in October while core prices, which strip out volatile food and energy costs, were unchanged.

Sales at home furnishing stores declined 0.9% last month as the housing slump took its toll while gasoline stations posted an 0.8% increase.

Excluding autos, October sales rose 0.2%, a shade below economists’ forecast for an increase of 0.3%.

On the inflation front, the PPI data showed that energy prices fell 0.8% in October after a 4.1% rise in September. Prices for light trucks, which include slow-selling sport utility vehicles and pickups, fell 2.7%.

Core prices excluding cars and light trucks rose 0.2% in October.

Economists and the Fed expect the economy to slow after a surprisingly robust third quarter. But high oil and food costs have raised concerns that the central bank may be reluctant to cut interest rates further for fear of stoking inflation.

Wednesday’s data leave “the door more open for the Fed to do more [interest-rate] cutting,” said Robert Macintosh, chief economist at Eaton Vance Corp. in Boston. “Inflation’s not an issue, and consumers continue to pull back on their activity.

“If the consumer really pulls back, then you are talking about a recession,” he added.

Yet some analysts said tame inflation could be fleeting because the data did not fully reflect a steep oil-price rally in late October. Oil futures flirted with the psychologically significant $100-a-barrel mark last week.

The inflation report also may have been skewed by automakers’ shift to a new model year, which has a tendency to throw off calculations and possibly understates inflation.

In a separate report Wednesday, the Commerce Department said business inventories rose 0.4% in September, which might also point to slower growth ahead as businesses work to pare bloated stocks.

Investors are watching retail sales data closely for signs that consumers are caving, which would deal a severe blow to the already shaky U.S. economy.