U.S. retail sales declined in September and prices paid by businesses also fell, worrisome signs that consumer demand may be faltering while inflation is failing to gain traction.

The two reports on Wednesday could deepen concerns at the U.S. Federal Reserve over the readiness of the economy to absorb interest rate hikes planned to begin in the middle of next year.

Total retail sales dropped 0.3 percent, the Commerce Department said. Analysts had expected a fall, as auto production has cooled and oil prices have fallen sharply in recent months on signs of slowing global economic growth.

What came as more of a surprise was a drop in so-called core sales, which strip out automobiles, gasoline, building materials and food services, and correspond most closely with the consumer spending component of gross domestic product. Economists polled by Reuters had expected the reading to increase last month. Instead, it fell 0.2 percent.

"Consumers have turned more cautious," said Ted Wieseman, an economist at Morgan Stanley in New York.

Prices for U.S. stock futures fell after the data was released, extending earlier declines on worries about the global economy. Yields dropped sharply on U.S. government debt, a sign investors could be betting the Fed will delay rate hikes.

The Fed has kept rates near zero since 2008 to foster job growth by encouraging businesses and consumers to borrow more.

But in September, sales at clothing retailers dropped 1.2 percent and receipts at sporting goods shops edged 0.1 percent lower. Sales at electronics and appliance stores, however, jumped 3.4 percent last month, when Apple (AAPL.O) released a new version of its flagship cellular phone.

Receipts at auto dealerships fell 0.8 percent, as did sales at service stations. The drop in gasoline sales reflected declining oil prices and is potentially positive for the broader economy as this could free up income and support discretionary spending in the months ahead.

Separately, the Labor Department said prices received by U.S. producers fell 0.1 percent in September, the first decline in over a year.

While many indicators have pointed to a strengthening U.S. economy, policymakers at the Federal Reserve are concerned that inflation has been stuck below their 2 percent target.

The Fed targets inflation felt by consumers, but the producer price report can point to inflation pressures down the road. And Wednesday's report suggests these are generally lacking.

Producer prices rose 1.6 percent in the year through September, the lowest annual reading in six months and down two tenths from August's print.

The PPI last month was dampened by a 2.6 percent decline in gasoline prices. Food prices slipped 0.7 percent.

When stripping out volatile prices for food, energy and trade services, producer prices fell 0.1 percent. These so-called core producer prices rose 1.7 percent from the same month of 2013.