WASHINGTON (AFP) — US consumers hunkered down in the face of a sharply slowing economy and a global financial crisis, sending retail sales plunging a record 2.8 percent in October, government data showed Friday.
The monthly decline in retail sales reported by the Commerce Department was the fourth in a row and far steeper than analysts' consensus forecast of a seasonally adjusted drop of 2.1 percent.
It was the deepest decline since the department began reporting the indicator in 1992.
"Another ugly month that caps off four consecutive months of increasingly steep declines," said Brian Bethune at IHS Global Insight.
"Consumers were already fighting to keep their heads above water in the third quarter, and in October they were thrown several heavy cement blocks in the form of steep declines in employment and hours worked, further declines in house prices, and a massive negative shock to household net financial assets."
Excluding motor vehicle sales, a drag in recent months, retail sales fell 2.2 percent in October, another record decline and widely exceeding analysts' forecasts of a 1.2 percent fall.
On a 12-month basis, headline retail sales decreased 4.1 percent from October 2007.
The market had braced for a dismal October report, after a string of bad news such as General Motors's announcement that vehicle sales plunged 45 percent in October.
But the data painted an even grimmer picture of Americans sharply reining in spending amid the accelerating financial crisis that has battered the world's biggest economy and is forecast to plunge the major advanced economies into recession.
The report is "consistent with deepening recession and the continuation of disinflation," said Natixis analyst Elsa Dargent.
The report also showed conditions had been worse than initially estimated for prior months. The department revised the September drop to 1.3 percent from 1.2 percent, and the August decline to 0.7 percent from 0.4 percent.
The accelerating decline in retail sales bodes ill for the ailing economy, which depends on consumer spending for two-thirds of its activity. The world's largest economy contracted at a 0.3 percent annual pace in the third quarter and and is expected to shrink sharply in the October-December quarter.
The report comes ahead of the year-end holiday shopping season, critical for retailers' annual profits.
"The steep dive in retail sales is also feeding back to reduce employment in the retail sales sector at a critical time of the year," Bethune noted.
The plunge was led by motor vehicles and parts, down a hefty 5.5 percent as consumers delayed purchases amid difficult financing conditions.
Gasoline sales skidded 12.7 percent. Americans have curbed driving since gasoline prices reached record peaks months ago, and have continued to do so despite a steep fall of prices at the pump.
Like previous months, the October decline in retail sales was broad-based: 2.5 percent in furniture, 2.3 percent in electronics and appliances, and 1.4 percent in clothing.
The pullback underscored a deepening loss of confidence as the government poured hundreds of billions of dollars into the financial system and took extraordinary measures to prop up ailing banks and other businesses as the crisis spiraled following the failure of investment bank Lehman Brothers.
Treasury Secretary Henry Paulson said Wednesday that the government planned to use part of the 700 billion dollar financial rescue package to support the consumer credit sector.
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