Rate Hike Unlikely On Slowing US Economy

The U.S. economy is showing signs of slowing down and the prospects for an interest rate hike by the end of the year are decreasing.

According to the Commerce Department, retail sales barely rose in September, edging up only 0.1 percent last month largely due to cheaper gasoline which pushed gas station receipts down 3.2 percent. Producer prices reported their biggest decline in eight months.

The Commerce Department report showed that retail sales excluding automobiles, gasoline, building materials and food services slipped 0.1 percent last month after a downwardly revised 0.2 percent gain in August.

Reports show that the economy has been losing momentum as a result of a dollar that has strengthened against other major currencies, sluggish global growth and lower oil prices that are impeding capital spending in the energy sector. All these factors have contributed to a halt in job growth in the past two months.

No Rate Hike Foreseen

According to Paul Ashworth, chief U.S. economist at Capital Economics in Toronto, “The softness of September’s figures supports our view that the Fed probably isn’t going to hike interest rates until early next year.”

The Commerce Department report also showed that business inventories remained unchanged again in August, triggering JPMorgan to cut its third-quarter GDP estimate by half a percentage point to an annual rate of 1 percent.

The economy grew only 3.9 percent in the second quarter while discretionary spending, which could provide some cushioning against weakening global growth, remained somewhat healthy as consumers bought automobiles and furniture and spent more on hobbies, clothing and dining out.

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Author: Travis Esquivel

Travis Esquivel is an engineer, passionate soccer player and full-time dad. He enjoys writing about innovation and technology from time to time.

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