US retail sales fell more than expected in August amid weak purchases of cars and a range of other goods, pointing to cooling domestic demand that further diminishes expectations of a Federal Reserve interest rate increase next week.
The economic growth outlook also took a hit from other data showing a drop in manufacturing output last month.
The reports, which extended August's run of weak data, prompted economists to cut their growth estimates for the third quarter.
"With households not buying, manufacturers stopped producing. If the Fed is data dependent, then the next time a hike would likely come is December," said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.
The Commerce Department said retail sales declined 0.3% after edging up 0.1% in July.
Sales were up 1.9% from a year ago. Excluding cars, petrol, building materials and food services, retail sales slipped 0.1% last month after a similar drop in July.
These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.
Economists had forecast overall retail sales slipping 0.1% and core sales climbing 0.3% last month.
Sales were almost broadly weak, rising in only four categories, including clothing stores and restaurants and bars.
Receipts at auto dealerships fell 0.9% and online sales, whose share has grown in recent years, dropped 0.3%.
The Fed will hold its policy meeting next Tuesday and Wednesday. Fed Governor Lael Brainard said on Monday she wanted to see stronger consumer spending data and signs of rising inflation before hiking rates.
The US central bank raised its benchmark overnight interest rate at the end of last year for the first time in nearly a decade, but has held it steady since amid concerns over persistently low inflation.
Financial markets are pricing in a roughly 12% probability of a rate hike next week, down from 15% before the data, according to the CME FedWatch tool.
September rate hike probabilities have been declining since early this month in the wake of a slowdown in job growth in August.
Stocks on Wall Street rose on the diminishing chances of a rate hike next week, while the dollar was little changed against a basket of currencies. Prices for shorter-dated US Treasury debt rose marginally.
