Retail sales dropped for the first time in seven months in September, falling -0.3% in a reversal from an upwardly revised +0.6% gain in August, and bringing yearly sales down to +4.1% (-0.3%). Sales fell for motor vehicles (-0.9%) and at service stations (-0.7%), although the drop in service stations was largely due to falling gasoline prices. Sales at department fell more steeply in September at -1.4% compared to a -1.2% drop in August, bringing yearly sales down -6.1%. Nonstore (e.g. internet) retailer sales uncharacteristically dropped -0.3% after a +1.2% gain in August, causing yearly sales to come in at a +12.9% increase after August’s +15.3% yearly rate. Sales at “Miscellaneous” stores (NAICS code 453) were up +0.5% for the month and yearly gains reached +9.3%.

The October release of the Federal Reserve’s Beige Book summary of economic conditions noted that the U.S. economy expanded at a slight to modest pace, with more upbeat reports from the southern and western states than the midwest and great plans. Household spending was described as “solid on balance”, and light vehicle sales were robust, although activity was dragged down by declines in manufacturing, slowing global growth, trade tensions, and deteriorating agricultural conditions. A tight labor market held back hiring, with some smaller firms reporting difficulty in matching pay offers from larger firms and a broader tendency for employers to use bonuses and benefits to attract and retain workers. Business contacts expected the economic expansion to continue, albeit with a lowered growth outlook for the next 6-12 months.

Industrial production for August was revised upward to +0.8%, but dropped -0.4% in September, and the yearly rate fell to -0.1%. Reductions in drilling and crude oil extraction contributed to a -1.3% drop in mining output, which in turn pulled the annual rate for mining in Q3 down to +4.4% for the first quarterly drop in mining output in three years. The motor vehicle industry strike pushed motor vehicles and parts down -4.2% and durable goods manufacturing down -0.7%, which helped drag down overall manufacturing to -0.5% for the month. Excluding the effects of the drop in motor vehicle production, overall manufacturing was down -0.1% for the month, with drops for primary metals (-1.6%), machinery (-1.4%), and plastics and rubber products (-1.2%), but gains for apparel (+2.3%), furniture (+1.4%), and computers (+1.0%). On a yearly basis, the largest manufacturing gains were for computers (+5.3%), nonmetallic mineral products (+2.1%), and aerospace (+2.0%), and the largest drops were for apparel (-6.2%), motor vehicles (-5.4%), and printing (-3.8%).