Retail sales suffer record drop

Government reports a worse-than-expected 2.8% decrease; sales excluding autos also fell a much worse 2.2%.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Parija B. Kavilanz, CNNMoney.com senior writer

What should Congress do for U.S. automakers?
  • Lend them money
  • Do nothing
  • Lend them money but kick out current execs

NEW YORK (CNNMoney.com) -- U.S. retail sales in October suffered the worst monthly drop on record as more Americans shunned discretionary purchases amid accelerating job losses in a worsening economy.

It marked the fourth consecutive decline in monthly retail sales.

The Commerce Department said Friday that retail sales fell 2.8% last month, compared with a revised 1.3% drop in September. September retail sales were originally reported to have dropped 1.2%.

Economists surveyed by Briefing.com on average had forecast a decrease of 2.1% for October.

"These numbers reinforce the fact that we are in a recession," said Michael Niemira, chief retail economist with the International Council of Shopping Centers (ICSC).

October's decline is the worst since the Commerce Department adopted the North American Industry Classification System (NAICS) standard to measure retail sales in 1992.

But based on the government's prior standard for measuring retail sales, last month's decline would be the worst since January 1987, when overall retail sales fell 6.5%.

Sales excluding autos and auto parts fell 2.2% in October, also worse than expected, compared to a revised 0.5% drop in September.

The forecast was for a 1.2% decline, according to Briefing.com.

Retail sales were extremely weak across most categories, led by a 5.5% drop in auto purchases last month. Sales at gasoline stations plunged 12.7%, largely because of plunging pump prices. Electronics stores suffered a 2.3% decline, while furniture store sales fell 2.5%.

"Consumers are aggressively cutting back," said Scott Hoyt, director of consumer economics with Moody 's Economy.com. "They're not even taking the savings from lower gas prices and spending it in stores."

Elsewhere, clothing sales fell 1.4% and department stores suffered a 1.3% drop in sales last month.

Hoyt said Americans are "conserving their money" because their confidence is so low. "They are concerned about their jobs and their eroding wealth," he said.

But since consumer spending fuels two-thirds of economic activity, Hoyt said continued deceleration in retail sales could become a "significant drag on the economy."

"This would suggest that we are in a recessionary cycle," said Hoyt. "Businesses will start to invest less in their business and hire fewer people. This will again hit consumers. Round and round we go."

Experts said what's needed now is a multitude of stimulus actions to spur spending and help break this cycle.

"I think we need this sooner (rather) than later," said Hoyt. To top of page

Features
They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
No discounts here: 5 expensive stocks Talk of a stock market bubble is growing louder. These stocks are some of the priciest in the S&P 500. More
5 bold ideas from hedge fund titans Hedge fund managers revealed some of their big investment predictions at the CNBC Institutional Investor Delivering Alpha conference this week. More
6 events that spooked the market in 2014 It's been a bumpy 2014. Before Israel invaded Gaza and the plane crash in Ukraine, these six events threatened to derail the bull market ... briefly More

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.