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