Growth in U.S. retail sales stalled in August after a pitched battle over spending in Congress led consumer confidence to crumble, data showed on Wednesday.

U.S. producer prices were unchanged in August, held down by a drop in energy goods costs, a government report showed on Wednesday.]

KEY POINTS:

RETAIL SALES * Sales were unchanged from a month earlier, a substantially weaker reading than the median forecast for a 0.2 percent rise in a Reuters poll. * Sales growth during July was revised downward to 0.3 percent. * Consumer spending accounts for about two thirds of U.S. economic activity, and the Commerce Department data suggests growth in the first two months of the third quarter was weaker than many economists expected. * Excluding autos, sales increased 0.1 percent in August, below forecasts for a 0.3 percent gain.

PRODUCER PRICES * The Labor Department said prices paid at the farm and factory gate were slightly higher than the 0.1 percent drop expected by analysts polled by Reuters. * The report sent mixed signals about price pressures as energy costs abated, but core prices showed some pass through of recent surges in energy and food costs. * Core producer prices, which strip out volatile food and energy components, rose a less-than-expected 0.1 percent in the month. Analysts had forecast a 0.2 percent increase.

COMMENTS:

PETER JANKOVSKIS, CO-CHIEF INVESTMENT OFFICER, OAKBROOK INVESTMENTS LLC, LISLE, ILLINOIS:

Retail sales were a bit disappointing, obviously they missed the forecast for the most recent month and also the previous month was revised downward. But all in all there was still growth, so that it why you are not seeing a major sell-off in the futures -- it's still moving forward. Everybody knew the economy had slowed, but they are looking at the brighter side that at least it's still showing some growth.

(PPI) was pretty much in-line with expectations. The good news there is it is still leaving room for the Fed to act, there is nothing showing up there. The past couple of reports, prices have been growing reasonably quick, but this one was well contained and that will take one thing off the table that might constrain the Fed.

TOM PORCELLI, SENIOR U.S. ECONOMIST, RBC CAPITAL MARKETS, NEW YORK:

The consumer reacted to the debt ceiling, the downgrade and the equity market swoon by basically hunkering down and not spending. It was flat on the headline, but even more troubling for us is flat on the control number, which excludes gas, building and auto dealers. This is not a good sign for an economy that is struggling.

Maybe some of the weakness was built in to the Treasury market. The market basically could have thought there was some downside risk and perhaps that's mitigating any potential reaction here.

STEVEN RICCHIUTO, CHIEF ECONOMIST, MIZUHO SECURITIES, NEW YORK:

They show the slowdown in the economy is real, and it's working its way into the inflation picture. The economy is losing a bit more momentum from earlier this summer. It's a broad based slowdown, and that's pivotal.

FRANK DAVIS, DIRECTOR OF SALES AND TRADING, LEK SECURITIES, NEW YORK:

I don't think this will have an overall impact on the market, but some individual stocks will be worth keeping an eye on -- Best Buy, for example. Most of the focus is overseas, we're looking to see what happens with Greece, but certainly it would help if the data was more positive. We could use any reasonable positive information to grab onto in this market.

VIMOMBI NSHOM, ECONOMIST, IFR ECONOMICS, A UNIT OF THOMSON REUTERS:

Retail sales were disappointingly unchanged in August, after having been up 0.3% in July (revised from the first estimate of 0.5%). The largest drag was a 0.3% decline in autos, without which, sales would have managed to squeak up to 0.1% growth. Although today's figure is below expectations (0.2%), it is not that alarming given that sales have been pretty dull since Q1 (Feb, 1.3%) when consumers were benefiting from reduced payroll contributions prior to the onslaught of setbacks in the international marketplace since March. Since then, monthly growth has dribbled to a range of 0% to 0.3%, where it is common to see one positive month immediately followed by a stagnant month -- case in point, today's report.

MARKET REACTION: STOCKS: U.S. stock index futures pare gains BONDS: U.S. bond prices pare losses FOREX: The dollar briefly trims losses versus the euro

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