Gloomy Retail Sales Report Worse Than Expected

Washington, DC, Oct. 15, 2008--Retail sales suffered their steepest decline in three years last month, as U.S. households reined in spending amid a tough job market, the financial crisis and falling home values.

The stock market reacted to the news with a drop of more than 700 points in the Dow Industrials on Wednesday.

The Commerce Department reported Wednesday that retail sales fell 1.2 percent in September, nearly double the 0.7 percent drop expected by economists. The last time the measure fell this sharply was in August 2005 with 1.4 percent decline.

Retail sales have fallen for the third month in a row, the first time that has happened according to government data going back to 1992. Consumer spending accounts for nearly 70% of the economy.

A steep 3.8 percent decline in auto purchases helped depress the overall sales for the month.

Even when volatile auto sales were stripped from the report, sales fell 0.6 percent, three times the 0.2 percent decrease economists had predicted.

Particularly troubling is the sharp drop in retail sales from the same time a year earlier. The last time that happened was October 2002 and, prior to that, in 1991, he said.

Sales fell across a wide spectrum of retail categories. For September, furniture and home furnishings reported a 2.3 percent drop, electronics retailers sales declined by 1.5 percent, and department store sales fell by 1.5 percent.

The August retail sales report was revised to a weaker 0.4 percent decline.