Mixed data ahead of crucial US Fed meeting
US consumer spending grew at a fairly healthy pace over the past two months, but factory production slipped in August, providing the Federal Reserve with a mixed picture of the economy ahead of a rate-setting meeting later this week.
The Commerce Department said yesterday that retail sales excluding automobiles, gasoline, building materials and food services increased 0.4pc in August after an upwardly revised 0.6pc increase in July.
These so-called core retail sales, which correspond closely to the consumer spending component of gross domestic product, provided the latest sign of sturdy economic momentum and suggested the recent stock market sell-off had little immediate impact on US household spending.
A separate report from the Federal Reserve, however, showed manufacturing output fell a sharper-than-expected 0.5pc as auto production slid, after a rise of 0.9pc in July.
Excluding autos, factory output was unchanged.
Investors pinned their response on the general firm spending figures. US stocks opened higher, the dollar strengthened against a basket of currencies, and prices for US government bonds fell, sending their yields higher.
Signs of sustained strength in the economy could encourage the US central bank to raise benchmark overnight interest rates from near zero. The Fed's policy-setting committee meets today and tomorrow against the backdrop of a tightening US labour market, low inflation and slowing global growth. (Reuters)