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Wholesale Prices Fall, But Retail Sales Continue To Slide

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The Associated Press

Published: September 13, 2008

WASHINGTON - The largest drop in wholesale prices in nearly two years in August failed to spur consumers to spend more at shopping malls, raising new worries about a possible recession as the temporary boost from tax rebate checks becomes a distant memory.

The Labor Department reported Friday that wholesale prices declined 0.9 percent last month, nearly double the 0.5 percent drop economists had expected, as the price of all types of energy, from gasoline to natural gas, fell sharply.
Economists had expected that lower prices for gas might entice shoppers to spend more.

Instead, the Commerce Department reported that retail sales dipped 0.3 percent in August.

The August slump followed an even bigger 0.5 percent decline in July, the weakest performance in five months and much worse than the 0.1 percent decline originally reported.

The back-to-back drops in retail spending increased concerns that the economy, which has gotten a boost from $93.4 billion in stimulus payments, could falter in coming months now that the mass distribution of checks has come to an end.

The economy grew at a surprisingly strong 3.3 percent rate in the April-June quarter. Economists think the increase in the gross domestic product could slow to a barely discernible 1 percent rate in the current July-September period. And GDP actually may turn negative in the final three months of this year and the first quarter of next year, they think, meeting the classic definition of a recession.

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