Oil surges on weak inventory, retail sales slumps – stagflation continues to hit the heart of the economy
Joe Weinman
Aug. 13, 2008

Wall Street tumbled sharply as inflation worries remerged and the retail sales data showed that the consumer ran out of credit card limit to propel the economy any further.

Wall Street tumbled for a second session Wednesday after a government report on retail sales and a jump in oil prices raised investors'' concerns about consumers ability to spend and feed economic growth. The Dow Jones industrial average fell about 150 points, bringing its two-day decline to more than 300.

The Commerce Department said retail sales slipped 0.1 percent as rising prices helped offset the effect of economic stimulus payments to U.S. households. Excluding a big drop in sales of automobiles, retail sales rose 0.4 percent. But even on that basis it was the weakest showing in five months.

In the mean time commodities have started moving up again. Oil prices soared Wednesday after the government reported a surprisingly sharp decline in the nation's petroleum inventories.

U.S. crude for September delivery rose $1.92 to $114.93 a barrel in electronic trading. Oil had traded up 88 cents to $113.89 a barrel just before the report's release.

The Federal Reserve faces severe challenge as the economy suffers from severe stagflation.

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