Dismal data on inflation and retail sales released on Tuesday flashed fresh signs of stagflation in the U.S. economy.
Total sales at U.S. retailers rose a less-than-expected 0.1 percent in June, as auto sales posted their biggest drop in more than two years, a Commerce Department report showed.
Also on Tuesday, General Motors said it would cut employment costs, sell assets and borrow at least $2 billion to bolster liquidity in the face of plummeting sales.
The Labor Department said producer prices over the last 12 months were up 9.2 percent, the biggest increase since a 10.4 percent gain in June 1981 when the United States was last mired in a low-growth, high-inflation period known as stagflation.
A regional manufacturing survey showed factory activity in New York contracted for the fifth time in six months and data in the report suggested producers were passing on higher prices to consumers, which could add further fuel to inflation.
The reports come ahead of Federal Reserve Chairman Ben Bernanke's semiannual monetary policy testimony before the Senate Banking Committee, which starts at 10 a.m.
"The PPI number is just outrageous," said T.J. Marta, fixed income strategist at RBC Capital Markets in New York. "What does this mean for Bernanke later today? Certainly he's got to talk about the risk to inflation."
On Wall Street, U.S. stock index futures remained lower after the reports, while the dollar held onto its losses.
U.S. government bonds, which generally benefit in times of economic weakness, added to earlier gains.
The data coincided with a report from General Motors Corp , which said it would cut white-collar employment costs by 20 percent, sell up to $4 billion of assets, and borrow at least $2 billion in a bid to bolster its liquidity by $15 billion through 2009.
Economists had expected government tax rebate checks to boost June retail sales more, despite the weak economy, but much of that seems to have been reflected in May's gains.
Economists polled by Reuters had forecast total retail sales to rise 0.4 percent in June after a 0.8 percent gain in May that was initially reported as a 1.0 percent rise.
Excluding autos, retail sales rose 0.8, which was also below the pre-report consensus of 1.0 percent.
Excluding autos, building supplies and gasoline, retail sales rose 0.4 percent.
U.S. producer prices rose a far larger-than-expected 1.8 percent on the month in June as energy costs soared.
If there was any good news on inflation, it was that core prices at the producer level, which exclude food and energy, edged up just 0.2 percent.
The New York Federal Reserve's "Empire State" general business conditions index came in at minus 4.92 in July from minus 8.68 in June.
Worryingly, its indexes of prices paid and received both rose to their highest since the survey began in 2001.
The increase in prices received may raise concerns that inflation is being passed through to consumers.