WASHINGTON - U.S. consumers grew more cautious last month amid wild stock market swings, zero job growth and heightened concerns that the economy has weakened.

Retail sales were flat in August. At the same time, wholesale inflation leveled off. The latest data could give the Federal Reserve more impetus to adopt additional stimulus next week.

"The combination of those two reports sets the stage for, and warrants, additional action by the Fed," said Michelle Meyer, an economist at Bank of America Merrill Lynch.

Wall Street looked past the weak retail sales data. Growing optimism that European leaders would be able to contain their debt crisis drove stocks higher. The Dow Jones industrial average closed up 140 points for the day.

In August, consumers spent less on autos, clothing and furniture, the Commerce Department said Wednesday.

Hurricane Irene disrupted sales along the East Coast, analysts said. But many consumers were also spooked after a grim month that renewed recession fears.

The government reported that the economy barely grew in the first half of the year. Lawmakers fought over raising the debt ceiling. Standard & Poor's downgraded long-term U.S. debt for the first time in history. Stocks tumbled - the Dow lost nearly 16 percent of its value from July 21 through Aug. 10.

As a result, consumer confidence fell in August to its lowest level since April 2009, when the economy was still in recession. And employers added no net jobs during the month.

The government retail sales report is the first major read on consumer spending for August. Consumer spending is important because it accounts for 70 percent of economic activity.

The economy's weakness is helping to keep prices in check.

The Labor Department said its Producer Price Index, which measures price changes before they reach the consumer, was unchanged in August after a 0.2 percent rise in July. A drop in energy prices in August offset higher food costs.

The price of oil, cotton and other commodities have come down in recent months, after pushing up most measures of inflation earlier this year.

Slow inflation gives the Fed more room to take steps to boost the economy.

Fed Chairman Ben Bernanke acknowledged last week that inflation rose sharply in the spring. But he repeated his belief that the increase was temporary and that price pressures would moderate soon.

Fed policymakers meet for two days next week. Many economists expect they will decide to shift money out of short-term mortgage-backed securities and into longer-term Treasury bonds.

The move could push down longer-term interest rates, including rates on mortgages, auto loans and other consumer and business borrowing.

The central bank could take other steps, such as cutting the interest rate it pays on the reserves banks hold at the Fed. That could encourage banks to lend the money rather than keeping it parked at the Fed.

President Barack Obama has proposed a $447 billion job-creation package. He wants to cut Social Security taxes for workers, extend unemployment benefits, cut taxes for small businesses and spend more federal money to build roads, bridges and other public works projects.

The president's plan faces opposition from Republicans, particularly because he wants to pay for it with higher taxes on wealthier households, hedge fund managers and oil companies.

The government retail sales report offered a contrast to more upbeat data from major retailers and auto dealers.

Luxury chains like Nordstrom Inc. and Saks Inc. said affluent shoppers kept spending. And discounters such as Target Corp. and Costco Wholesale Corp. got a boost from shoppers buying batteries, bottled water and other supplies to prepare for Hurricane Irene.

Still, Best Buy Co., the largest U.S. consumer electronics retailer, reported Tuesday that its second-quarter profits plunged 30 percent.

"We're still facing an uncertain (economic) environment with volatile consumer shopping behavior, and this was evident in our results," Brian Dunn, CEO of Best Buy, said during a call with investors Tuesday.

Auto sales fell 0.3 percent in August, according to the government report.

Earlier this month, major automakers reported healthy sales increases in August, largely because dealers introduced new models and offered cheaper financing.

The disparity could be explained, in part, because industry figures compare the current month to the same month a year ago, while the government's figures are month to month.

But dealers who sell foreign cars continued to see a shortage of popular models because of supply chain disruptions caused by the March 11 earthquake in Japan.

Glenn Mears, who owns three dealerships near Dover, Ohio, said he didn't have many cars to sell at his Honda store for the first half of the month.

"When you start the month with five new Hondas sitting on your lot, that's a pretty big hurdle for us to jump," Mears said. "If we had not had that inventory situation, we would have done significantly better."

Mears said business has picked up after shipments started arriving. But he sold only 30 Hondas in August, down from his normal 48.

September sales so far have been strong, an indication that people who may have postponed buying in August have started returning to showrooms, he said.