Bushonomics: Retail sales plunge 1.2 percent in September

15 October 2008
By MARTIN CRUTSINGER

WASHINGTON -Retail sales fell off a cliff in September, plunging by the largest amount in two years as worried consumers shunned the malls and auto showrooms in the midst of the country's financial meltdown.

The Commerce Department reported Wednesday retail sales decreased 1.2 percent last month, nearly double the 0.7 percent drop that had been expected. The surprise showing significantly increased the risks of a recession because consumer spending is two-thirds of total economic activity.

The weakness was led by a 3.8 percent drop in auto sales. Sales dropped below 1 million units as consumers struggled to find financing.

Retail sales have now fallen for three consecutive months, the first time that has occurred on government records that go back to 1992. Economists had expected sales to be down in September as a flood of bad news about the financial system and rising unemployment increased consumers' worries.

Many analysts believe the overall economy, as measured by the gross domestic product, is slipping into a recession, triggered by a steep slump in housing and the severe credit crisis.

Even excluding auto sales, retail sales showed widespread weakness, falling by 0.6 percent or double the decline outside of autos that had been expected.

Sales at department stores fell by 1.5 percent following an even bigger 1.6 percent drop in July. Sales at furniture stores fell by 2.3 percent. Sales at appliance stores slid 1.5 percent.

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Bushonomics: Retailers report weak September sales