U.S. retail sales fell in October for the first time in three months as superstorm Sandy slammed the brakes on automobile purchases, suggesting a loss of momentum in spending early in the fourth quarter.
Other data on Wednesday showed little inflation, with wholesale prices falling in October for the first time since May, giving the Federal Reserve latitude to maintain its ultra easy monetary policy stance to nurse the economy back to health.
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Retail sales dipped 0.3 percent last month after a 1.3 percent increase in September, the Commerce Department said. Economists had expected sales to fall 0.2 percent.
The retail sales report offered an early read on the storm's impact on the economy. Its full impact will likely be felt in the November data.
Analysts estimate that the storm, which lashed the densely populated East Coast and caused up to $50 billion in damage, could shave as much as half a percentage point from fourth-quarter GDP.
"While we anticipate some positive payback later in the quarter, this suggests a soft start to the fourth quarter for real consumption," said Peter Newland, senior economist at Barclays in New York.
The Commerce Department said it had received indications from companies that the storm had both positive and negative effects on October's sales data.
U.S. stock index futures held at higher levels while Treasury debt prices pared losses after the data.
Motor vehicle sales declined 1.5 percent, the largest fall since August last year, after increasing 1.7 percent in September. Auto manufacturers have blamed the storm for the drop in sales and expect a rebound in November.
Excluding autos, retail sales were unchanged last month after advancing 1.2 percent in September, the Commerce Department said.
The storm also likely dented sales at clothing stores, which dipped 0.1 percent after rising 0.4 percent the prior month.
Building material sales surprisingly fell 1.9 percent, defying expectations of a boost from pre-storm purchases. Building materials and garden equipment sales has increased 2.1 percent in September.
Receipts at gasoline stations surprisingly rose 1.4 percent last month. Gasoline sales had been expected to show some weakness because of a decline in gasoline prices during the month. Excluding gasoline, sales recorded their largest drop since May 2010.
Separately, the Labor Department said its seasonally adjusted producer price index slipped 0.2 percent last month, the first decline since May, after increasing 1.1 percent in September.
Economists had expected prices at farms, factories and refineries to increase 0.2 percent last month.
Wholesale prices excluding volatile food and energy costs also fell 0.2 percent, the largest fall since October 2010, after being flat in September. Economists had expected core PPI to rise 0.1 percent.
The benign tone of the producer price inflation report should give the Fed room to keep its low interest rate environment. Consumer inflation is currently hovering around the Fed's 2 percent target.
The U.S. central bank in September launched a third round of asset purchases, committing to buy $40 billion worth of mortgage-backed securities every month until there is a sustained improvement in the labor market.
It hopes the purchases will drive down borrowing costs.
Aside from superstorm Sandy, the retail sales report highlighted the sluggishness of domestic demand.
Sales of electronics and appliances fell 1.0 percent, unwinding some of the prior month's boost from purchases of Apple's iPhone 5. Furniture sales fell 0.6 percent after dropping 0.2 percent in September.
So-called core retail sales, which exclude autos, gasoline and building materials, fell 0.1 percent after increasing 0.9 percent in September. Core sales correspond most closely with the consumer spending component of the government's gross domestic product report.
Last month's fall suggested consumer spending slowed early this quarter after ending the July-September period on a solid footing.
(Editing by Andrea Ricci)