Sales at U.S. retailers unexpectedly dropped in August and prices at the wholesale level fell for the first time this year as Americans cut spending in the face of job losses and record foreclosures.

The 0.3 percent decline in purchases followed a 0.5 percent drop in July, the Commerce Department said today in Washington. Excluding automobiles, purchases were down 0.7 percent, the most this year.

The figures signal faltering consumer spending will keep inflation in check, buttressing speculation that the Federal Reserve may have to resume lowering interest rates as soon as the end of this year. Futures trading indicates about a 40 percent chance that the Fed will ease credit by December. Stocks fell and Treasuries were little changed.

(Bloomberg.com)