By James Langton

(April 12 – 12:20 ET) – Today’s weak U.S. economic data should keep the track clear for further cuts to interest rates, according to economists from BMO Nesbitt Burns

This morning U.S. March retail sales were reported down 0.2%, slightly below consensus estimates. Excluding the auto sector, sales were down 0.1%, also below expectations. BMO Nesbitt says, “The declines in retail sales were quite large in discretionary spending categories.” The lack of discretionary spending was supported by news that U.S. initial jobless claims also came in worse than expected.

Economists at CIBC World Markets note, “The loss of momentum in February and March already hints that Q2 will be a much weaker story for the consumer sector, as households take note of the trends in both hiring and equity wealth. The data are a negative for consumer related stocks.”

At the same time, the lack of inflation evident in the Producer Price Index indicated that inflation should not be a worry for the U.S. Federal Reserve Board if it wants to lower rates. “Producer price inflation looks to remain tame for the coming months, as consumer demand will remain soft, markets remain intensely competitive and the US dollar is still strong,” says BMO Nesbitt Burns.

BMO concludes, “Inflation remains off the radar screen and provides no impediment to the Fed easing interest rates further.”