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News > Economy
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Retail sales drop sharply
graphic December 13, 2001: 10:13 a.m. ET

November sales far lower than forecast; producer prices, jobless claims fall.
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  • Broadest measure of U.S. trade gap falls 11.7% - Dec. 12, 2001
  • The push for a stimulus package - Dec. 12, 2001
  • U.S. unemployment highest in six years - Dec. 7, 2001
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  • CNN.com - Bush tries to break stimulus deadlock - December 12, 2001
  • Home - U.S. Department of Commerce
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    NEW YORK (CNN/Money) - Retail sales posted the biggest drop on record in the United States last month as automakers began cutting back on steep discount promotions that sent sales soaring in October.

    Sales fell 3.7 percent to a seasonally adjusted $293.6 billion, the Commerce Department said, the biggest drop on record, after soaring a revised 6.4 percent in October. The number was weaker than the 3.1 percent drop analysts had forecast, according to a poll by Briefing.com.

    "That report certainly reveals the recession is not over. The gains we had in September are not sustainable and illustrate why the central bank has to continue to lower rates," said Anthony Chan, chief economist at Banc One Investment Advisors. "At this juncture, the easing of rates basically is serving as a consumer confidence booster."

    The Federal Reserve cut interest rates for the 11th time this year Tuesday, bringing a key short-term bank lending rate to its lowest in 40 years. The central bank said that while it saw possible hints of a recovery in the United States, it was ready to cut rates again to help prop up the world's largest economy.

    Excluding autos, sales fell 0.5 percent in November after a 1 percent rise in October. Sales of autos and car parts sank 11.9 percent after dealers began to scale back zero-percent financing deals at the end of November. Auto sales account for about a quarter of all retail sales in the United States.

    "I think it was interesting that sales fell despite the fact that we had limited auto incentives in November. It raises the question of what is likely to happen once these incentives disappear entirely," Chan said, adding that's why the Fed left the door open for additional rate cuts.

    Stocks headed lower Thursday on the weak retail sales number and Lucent Technologies (LU: Research, Estimates), which warned of a wider-than-expected first-quarter loss before the open.

    Consumers, whose spending accounts for two-thirds of the economy, have sharply reined in their spending this year, particularly during the crucial holiday season, as they remain cautious in the face of a recession spurred on by the Sept. 11 terrorist attacks on the World Trade Center and Pentagon.

    The nation's retailers reported just a 2 percent rise in November sales last week, which is 1 percent to 1.5 percent off from analysts' forecasts.

    Americans have also shifted their leaner spending away from traditional department stores and specialty shops like Federated's (FD: down $0.84 to $36.45, Research, Estimates) Macy's and the Gap (GPS: unchanged at $13.00, Research, Estimates) to discount chains such as Wal-Mart Stores (WMT: down $0.79 to $53.54, Research, Estimates), Target (TGT: down $0.38 to $35.84, Research, Estimates) and Costco Wholesale (CSCO: down $0.94 to $19.56, Research, Estimates)  

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    Though they have cut back, consumers demonstrated they do still have the money to spend, as evidenced by the record auto sales last month.  Detroit turned to zero-percent financing and other steep incentives following the Sep. 11 attacks in an effort to drive business, which had been struggling all year amid the slowing economy.

    While incentives sparked a car-buying binge in October, they served to pull sales from November and December from customers who had been on the fence about a new purchase, causing the November numbers to drop.

    Still, not all analysts take a grim view of the report. Some find reason for optimism.

    Click here for more economic news

    "It's not a huge surprise at all. We knew that was going to happen with auto incentives, which did little more than borrow sales from the future. "We did see some general weakness in sales, but not huge," said Wayne Ayers, chief economist at FleetBoston Financial.

    Separately, the Producer Price index fell 0.6 percent in November, the Labor Department reported, a bigger drop than the 0.4 percent drop analysts had expected. The decrease came mostly from lower energy prices at the wholesale level.

    Additionally, the department said first-time jobless claims fell to 394,000 last week, posting the biggest drop in more than nine years.

    Ayers said the slight drop in retail sales excluding autos, combined with a better-than-expected unemployment number, signaled that the economy is not in quite as dire straits as many perceive.

    "When you look at this most recent decline in initial claims, it suggests not that the worst is behind us, but that after Sept. 11, unemployment telescoped," Ayers said. "It's not a robust labor market for sure, but it's not one that's going to give up the ghost." graphic

      RELATED STORIES

    The push for a stimulus package - Dec. 12, 2001

    U.S. unemployment highest in six years - Dec. 7, 2001

      RELATED LINKS

    CNN.com - Bush tries to break stimulus deadlock - December 12, 2001

    Home - U.S. Department of Commerce





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    Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.

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