U.S. stock index futures edged lower on Tuesday as investors awaited key economic data, including the retail sales report, for more evidence of an economic recovery.

* The U.S. Commerce Department is to release August retail sales, with economists polled by Reuters expecting a 2.0 percent rise compared with a 0.1 percent fall in July. Excluding automobiles, sales are seen up 0.4 percent, compared with a 0.6 percent decrease the prior month.

* An uptick in consumer spending is seen as crucial for any economic recovery to continue.

* Investors are definitely looking for the beginnings of some strength there, given the back to school season and some clues as to what Christmas might be like, said Rick Meckler, president of investment firm LibertyView Capital Management in New York.

We continue to wait for this sort of return to normalized retail sales, and the longer it stays at depressed levels, the more people are going to question whether the new normal is in the lower number.

* S&P 500 futures fell 1.10 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures dropped 5 points, and Nasdaq 100 futures shed 2 points.

* The U.S. Treasury Department is talking to Citigroup Inc about how to sell the roughly one-third stake it acquired as part of its bailout of the bank, news agency Bloomberg reported, citing people familiar with the matter.

* Kraft Foods Inc , North Americas's biggest food group, said it plans to hold talks in the coming weeks with British bid target Cadbury Plc that may lead to a new offer for the second biggest global candy and chocolate maker.

* The Labor Department will release the August Producer Price Index (PPI). Economists look for an 0.8 percent increase compared with a 0.9 percent decrease in July. Excluding volatile food and energy items, PPI is seen up 0.1 percent, compared with a 0.1 percent drop the prior month.

* European shares were flat on Tuesday, with losses in insurers overshadowing gains in utility stocks on the day marking the one-year anniversary of the Lehman Brothers collapse.

* Asian stocks edged up, with markets in South Korea and Taiwan closing at 14-month highs, as investors put their faith in a global economic recovery and looked past a trade spat between the United States and China.

* U.S. stocks rose on Monday as reports of more merger activity added to a string of recent deals, suggesting investors still see value in the market after its run-up of more than 50 percent since March.

(Reporting by Chuck Mikolajczak; editing by Jeffrey Benkoe)

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