Retail Sales
Total retail sales were unchanged in August, after rising by a downwardly revised 0.3% in July (originally reported as a 0.5% gain). The report was largely mixed, with a few categories, including sporting goods, hobby, etc. (2.4%), electronics and appliances (0.5%), and nonstore retailers (0.5%) improving. The largest declines came from miscellaneous store retailers (-2.2%), followed by clothing and clothing accessories (-0.7%) and motor vehicles and parts (-0.3%). Sales are 7.2% above their year-ago level. Core sales, net of building materials, gas stations, and motor vehicle sales, were also unchanged in August. On net this report lowers our expectations for personal consumption expenditures in the third quarter, although we still expect the pace to accelerate from the dismal first half.

Industrial Production
Industrial production increased 0.2% in August following a 0.9% jump in July. Production in manufacturing industries rose 0.5% following an increase of 0.6% in July. Motor vehicle sales, a component of manufacturing drove the increase, rising 1.7%. Mining rose 1.2% after growing 1.1% in July. Utilities fell 3.0% after an increase of 2.8% in the previous month. Capacity utilization, which has gradually improved over the past year, rose slightly in August to 77.4%. The pace of production has picked up a bit in the last couple of months, but with capacity utilization still low we do not expect much acceleration from our current growth rates.

Consumer Price Index
The consumer price index rose 0.4% in August after rising 0.5% in July. The increase in headline inflation was driven by modest growth in food prices and a sharper increase in energy prices. Energy prices rose 1.2% after growing 2.8% in July. Food prices increased 0.5%, up from 0.4% in July. Over the year the CPI is up 3.8%. Core prices, net of food and energy prices increased 0.2% in August and are up 1.9% over the year. The pace of growth in food prices has gradually slowed since the first quarter and energy prices have slowed as well. At the same time, core prices have increased over the past few months, although the pace has been more gradual. We expect limited price increases over the next few months.