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Retail sales jump 1%
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November 13, 1998: 9:21 a.m. ET
October figure higher than expected; producer price index climbs 0.2%
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NEW YORK (CNNfn) - Prices at the wholesale level rose to higher-than-expected levels last month, but the Federal Reserve Board, which controls interest rates, is more likely to zero in the unexpected strength of October retail sales at its upcoming meeting next Tuesday, analysts say.
The Commerce Department Friday reported a full 1 percent jump in retail sales last month, compared with an unrevised 0.3 percent gain in September.
Economists, unsure how the effects of an earlier interest rate cut and stock market volatility would play out, had predicted a rise of 0.6 percent.
Retail sales account for about two-thirds of the national economic activity.
Excluding auto sales, retail sales were up 0.5 percent.
Auto sales soared 2.6 percent to $55.83 billion in October after a 0.9 percent rise in September, while clothing sales climbed 1.9 percent to $10.3 billion, reversing a 3 percent decline in September.
The healthy October sales figures, the largest rise in five months, suggest consumers are out spending money despite concerns over global market volatility and domestic stock market shake-ups. More importantly, they point to a strong fourth-quarter and holiday sales season ahead.
The news, which painted an overall healthy picture of the U.S. economy, triggered a sell-off in the bond market, which in recent months had been the beneficiary of an investor flight to quality.
The 30-year Treasury bond fell 21/32, pushing the yield up to 5.29 percent.
At the same time, the Labor Department Friday reported a 0.2 percent jump in the October producer price index, which tracks wholesale prices.
The core producer price index, which excludes the volatile food and energy sectors, rose 0.1 percent.
Economists had predicted the index would climb 0.1 percent for the month.
According to the Labor Department, apparel prices rose 1.9 percent during the month from a revised drop of 3 percent. General merchandise prices rose 0.2 percent, from a revised 0.8 percent jump in September.
Crude goods prices in October recorded their largest gain since rising 4.6 percent in the year-ago month and energy prices had their biggest rise since December 1996.
Analysts say they expect the Federal Reserve to ease interest rates once more this year, but they are unsure if that decision will come at the next Fed Open Market Committee meeting Tuesday or in December.
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