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U.S. retail sales dip
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May 11, 2000: 2:09 p.m. ET
Wall Street surprised by 0.2% dip in April; decline is the first since 1998
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NEW YORK (CNNfn) - U.S. retail sales fell in April, the government reported Thursday, the first decline since August 1998 and a surprise to Wall Street economists who had been expecting a slight increase. The data fostered some hope that U.S. interest rates will rise at a slower rate than previously anticipated.
Retail sales edged down 0.2 percent to $266 billion last month, the Commerce Department said, compared with a revised 0.5 increase in March. Analysts surveyed by Briefing.com had forecast a 0.5 percent increase in April.
"I think that if we start to see more statistics like this, then the Fed will have absolutely no ammunition to keep raising rates," said Peggy Farley, president of Ascent Meredith Asset Management. "This means that the Fed has already been successful in slowing the economy and probably will ease off in raising rates in the future."
Car sales fell 0.7 percent while sales at gas stations declined about 2 percent as gasoline prices slipped. Americans also spent less on clothing and on eating in restaurants last month. Several retailers reported below-par sales data last week, with many of them blaming unseasonably poor April weather for holding back purchasing.
The retail sales data are a good guide to consumer activity in the United States because consumer purchasing accounts for about two-thirds of U.S. economic activity and has been an important factor in the economy's nine-year bull run.
Rate rise ahead, but how much?
Excluding autos, which account for about a quarter of the total, retail sales were unchanged in April, versus analysts' forecasts of a 0.5 percent increase. Sales, excluding autos, rose 0.9 percent in March.
Analysts were encouraged by the report, because it may point to slower growth and lower inflation in the United States. But they cautioned that one month's data are not enough to provide concrete evidence of a significant slackening in the world's largest economy.
"This is one weak number in the context of an extremely strong economy. One data point doesn't make a trend," Harvinder Kalirai, economist at IDEAglobal.com, told CNNfn's Before Hours after the report.
Separately, the Labor Department said weekly jobless claims fell to 297,000 last week, from a revised 304,000 the prior week. The reading still was above Wall Street forecasts of 285,000, pointing to a bit less tightness in the job market.
The Labor Department also Thursday reported a 1.6 percent decline in import prices during April, the first decline in 10 months and the largest drop in more than seven years. Lower oil prices played a significant role in the decline, after oil-producing countries decided to boost output.
Investors liked the data
Investors liked what they saw in the sales data, hoping the Federal Reserve may not raise interest rates as aggressively as some on Wall Street have been expecting. Stocks rose early Thursday, and the opening optimism gathered steam by midday.
The Dow Jones industrial average rose 170 points, or about 1.6 percent, to 10,538.97, while the tech-led Nasdaq composite index jumped 95 points, or 2.8 percent, to 3,479.79, after falling sharply in recent sessions.
The Federal Reserve, the U.S. central bank, has raised rates five times since June - each time by a quarter percentage point -- in a bid to slow the economy and ward off inflation. Fed policy makers, due to meet next Tuesday, are expected to raise rates again, perhaps by as much as half a percentage point, forecasters say.
Altering monetary policy is a key tool for central banks to manage the economy. Raising interest rates makes borrowing more expensive, theoretically reining in purchasing of big-ticket items and dampening rising prices.
Bill Leszinske, president and CEO of Harris Investment Management, warned that a half-point increase still is in the cards. He told CNNfn's market coverage: "Virtually all statistics prior to today have been very strong." He added that the impending U.S. election also could have a significant bearing, with the U.S. central bank preferring to alter rates early in the year, rather than during the height of election season.
Still, some forecasters saw signs of an improved trend in Thursday's number. "The numbers do show a little bit of cooling in the economy," according to Gary Thayer, chief economist at AG Edwards & Sons. Thayer predicted the Fed would exercise caution next week, and raise rates by just a quarter percentage point. 
-- from staff and wire reports
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