U.S. retail sales flat as auto demand declines

Growth in U.S. retail sales stalled in August after a bitter fight over spending in Congress led consumer confidence to plunge, the government reported Wednesday. The Commerce Department said retail sales were unchanged from a month earlier, in a significantly weaker reading than economists had expected. Retail sales grew 0.3 percent in July. Auto sales fell 0.3 percent, and sales of clothing dropped 0.7 percent. The declines were offset by an increase in sales of gasoline, electronics, and food. Excluding autos, retail sales increased 0.1 percent last month, below forecasts for a 0.3 percent gain. Excluding sales of autos, gasoline, and building materials, so-called "core" retail sales also rose 0.1 percent in August. Consumer spending accounts for more than two-thirds of U.S. economic activity, and the Commerce Department data suggests growth in the first two months of the third quarter was weaker than many economists expected. The flat reading in August was a surprise following reports from retailers that back-to-school shopping and auto sales were strong during the month compared to a year ago. Consumer confidence fell sharply in August after the protracted battle over the U.S. budget hurt stock prices and pushed the country to the brink of default. Congress allowed a debate over spending go to the deadline early in August, nearly leaving the government unable to pay its obligations. The country's debt was downgraded by a major ratings agency.