Retail sales fell in October for the first time in three months as superstorm Sandy slammed the brakes on automobile purchases, suggesting spending lost momentum early in the fourth quarter.
Other data on Wednesday showed wholesale prices falling last month for the first time since May, giving the Federal Reserve latitude to maintain its ultra-easy monetary policy stance.
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Retail sales dipped 0.3 percent after a 1.3 percent increase in September, the Commerce Department said. Economists had expected sales to fall 0.2 percent.
"Sandy was a drag, but I expect we will see a gain in sales in November," said Gus Faucher, a senior economist at PNC Financial Services Group in Pittsburgh.
Part of the drop in sales was payback after two straight months of solid gains. It could also be a sign of hesitation among consumers facing the prospect of higher taxes next year.
Even excluding autos, retail sales were flat last month.
Automatic tax hikes and government spending cuts will siphon about $600 billion from the economy next year if Congress fails to act to avert them. This so-called fiscal cliff has already eroded business confidence.
"It's imperative that policymakers address the looming fiscal cliff now to give consumers some certainty heading into the holiday shopping season," said Matthew Shay, president of the National Retail Federation.
Car makers blamed Sandy, the monster storm that lashed the densely populated East Coast and caused up to $50 billion in damage, for the abrupt pullback in sales last month.
Automakers said traffic at East Coast dealerships slowed as residents began to brace for the storm, which hit at the end of the month. Sales tend to build up late in the month, which likely amplified the impact.
Ford Motor Corp estimated the industry lost sales of 20,000 to 25,000 vehicles, while Toyota put the loss at 30,000.
The Commerce Department said it had received indications from companies that the storm had both positive and negative effects on retail sales overall, but was unable to quantify them.
Motor vehicle sales declined 1.5 percent, the largest fall since August last year, after increasing 1.7 percent in September. Excluding autos, retail sales were unchanged last month after advancing 1.2 percent in September.
The storm also likely dented sales at clothing stores, but probably boosted receipts at food and beverage stores.
Economists expect the storm could shave as much as half a percentage point from economic growth in the fourth quarter. However, any lost activity should be made up early next year.
"That will come back in the first quarter. Spending on rebuilding will filter into growth numbers gradually over a number of quarters," said Julia Coronado, chief North America economist at BNP Paribas in New York.
Separately, the Labor Department said its producer price index slipped 0.2 percent last month, the first decline since May. The index had increased 1.1 percent in September.
Economists had expected prices received by farms, factories and refineries to increase 0.2 percent last month.
Excluding volatile food and energy costs, wholesale prices also fell 0.2 percent, the largest drop since October 2010.
The fall in this core gauge was tied to the introduction of new motor vehicle models, which can skew the data. Excluding autos, the core PPI was flat, consistent with a benign inflation environment, which should suit the Fed's accommodative policy.
Minutes of the U.S. central bank's October 23-24 meeting showed a number of officials thought the Fed should step up asset purchases next year to support the economy through low borrowing costs.
U.S. financial markets were little moved by the economic reports. Stocks on Wall Street were down as investors fretted about the fiscal cliff and Europe's ongoing problems. U.S. Treasury debt prices were mostly up, while the dollar fell against the euro.
BROAD WEAKNESS BEYOND STORM
Even accounting for Sandy's impact, the retail sales report highlighted the sluggishness of domestic demand.
So-called core retail sales, which exclude autos, gasoline and building materials and which correspond most closely with the consumer spending component of GDP, fell 0.1 percent. They had increased 0.9 percent in September.
The drop suggested consumer spending slowed early this quarter after ending the July-September period on a solid footing.
Building materials and garden equipment sales fell 1.9 percent, while sales of electronics and appliances fell 1.0 percent, unwinding some of the prior month's boost from purchases of Apple's iPhone 5.
Receipts at gasoline stations surprisingly rose 1.4 percent last month, despite pump prices falling almost 10 cents.
(Editing by Andrea Ricci, Tim Ahmann and James Dalgleish)