WASHINGTON (Reuters) - U.S. retail sales fell in December as unseasonably warm weather undercut purchases of winter apparel and cheaper gasoline weighed on receipts at service stations, the latest indication that economic growth braked sharply in the fourth quarter.

A shopper walks by the sodas aisle at a grocery store in Los Angeles April 7, 2011. REUTERS/Mario Anzuoni

The growth picture was further darkened by other data on Friday showing industrial production fell in December, dragged down by cutbacks in utilities and mining output. Business inventories were also weak, posting their biggest drop in just over four years in November.

Signs the economy has hit a soft patch - together with weak inflation, a stock market sell-off and faltering global growth - raises doubts on whether the Federal Reserve will raise interest rates again in March. The Fed lifted its benchmark overnight interest rate from near zero last month, the first rate hike in nearly a decade.

“The economy got hit from all sides in December. If these weak data keep going into 2016, the outlook is going to grow even dimmer given the recent financial market turbulence and the fears over what a slowdown in China means for the rest of the world,” said Chris Rupkey, chief economist at MUFG Union Bank in New York.

The Commerce Department said retail sales slipped 0.1 percent after increasing 0.4 percent in November. For all of 2015, retail sales rose just 2.1 percent, the weakest reading since 2009, after advancing 3.9 percent in 2014.

Retail sales excluding automobiles, gasoline, building materials and food services fell 0.3 percent after a 0.5 percent gain the prior month. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.

Though another report from the University of Michigan showed its consumer sentiment index rose to 93.3 early this month from a reading of 92.6 in December, households were less upbeat about current conditions, reflecting the recent equity market turmoil.

Friday’s reports joined weak data on construction, manufacturing and export growth in suggesting that growth slowed abruptly in the final three months of 2015. They could raise fears that the malaise from manufacturing and export-oriented sectors was filtering to the rest of the economy.

“While this growth slowdown should prove temporary, the deceleration in consumer spending could be a worrying sign of possible contagion to the domestic side of the economy from the global headwinds,” said Millan Mulraine, deputy chief economist at TD Securities in New York.

U.S. stocks fell sharply, with the S&P 500 index hitting its lowest since October 2014. U.S. Treasury debt prices rallied, while the dollar slumped to a near five-month low against the yen and hit a 2-1/2-week trough versus the euro.

Market-based measures of Fed policy expectations assigned a probability of 34 percent to the central bank’s raising rates at the March 15-16 meeting, according to the CME Group’s FedWatch program. JPMorgan pushed back its rate hike expectation to June from March.

CAUTIOUS OPTIMISM

Dollar strength and sluggish global demand, which have undermined manufacturing and export-oriented industries, are putting a squeeze on the economy. Energy sector spending cuts and business efforts to cut an inventory bloat are also a drag.

Another report from the Commerce Department showed business inventories fell 0.2 percent in November - the largest drop since September 2011.

“Fortunately, there are good reasons to expect the soft patch in consumer spending to be temporary. Solid employment growth and the gradual upward trend in wages will support healthy growth in disposable incomes through the year,” said Jeremy Lawson, chief economist at Standard Life Investments in Edinburgh.

In a fourth report, the Fed said industrial production fell 0.4 percent last month, primarily as a result of declines in utilities and mining output, after declining 0.9 percent in November. Unusually warm weather, which saw a drop in demand for heating, caused utilities output to drop 2.0 percent.

Industrial production fell at an annual rate of 3.4 percent in the fourth quarter.

As a result of the weak data, JP Morgan slashed its fourth-quarter GDP growth estimates from a 1.0 percent annual rate to only a 0.1 percent pace. Goldman Sachs cut its forecast by three-tenths of a percentage point to a 1.1 percent rate. The economy grew at a 2 percent pace in the third quarter.

A fifth report from the Labor Department showed its producer price index slipped 0.2 percent after increasing 0.3 percent in November. In the 12 months through December, the PPI declined 1.0 percent after falling 1.1 percent in November. December marked the 11th straight 12-month decrease in the index.

Producer prices fell 1.0 percent in 2015, the weakest since the series started in 2010, after rising 0.9 percent in 2014.

Coming on the heels of a report on Thursday showing a steep drop in import prices in December, weak producer prices suggest that an anticipated rise in inflation will probably fall well short of the Fed’s 2 percent target.