Retail Sales Plunge - American shoppers slashed their spending in October, causing retail sales to plunge by more than four percent compared to October 2007 sales numbers.

The latest snapshot of American spending revealed that consumers remained in distress as retail sales plunged by 2.8 percent in October compared with the previous month, according to government data released this morning.

The gloomy results marked the fourth straight month of decline as shoppers grapple with rising unemployment and a volatile stock market. Compared with October 2007, retail sales dropped a steep 4.1 percent, dragged down by a 23 percent fall-off in auto sales.

“Consumers were already fighting to keep their heads above water in the third quarter, and in October they were thrown several heavy cement blocks,” said Brian Bethune, chief U.S. economist for consulting firm IHS Global Insight.

The dismal data comes on the heels of yesterday’s jobs report by the U.S. Labor Department that showed mass layoffs rose to 1,330 during the third quarter, the highest level for that time period since 2001. Unemployment edged up to 6.5 percent last month.
Excluding autos, October retail sales fell 3.1 percent compared with the previous month, led by a double-digit decrease at gasoline stations as fuel prices declined. Electronics and appliance stores dropped 2.3 percent.

Richmond-based Circuit City said in its bankruptcy filing this week its customers have been unable to get credit for high-priced purchases such as flat-panel TVs, which in turn destroyed sales.

Department store sales fell 1.3 percent as shoppers cut back on discretionary spending. JCPenney also reported today that third-quarter earnings fell by 52 percent from $261 million last year to $124 million.

“Consumers went into hibernation in October while concerns about the economy were at a peak,” said Rosalind Wells, chief economist for the National Retail Federation, a trade group. “As economic uncertainty went from bad to worse, shoppers pulled back on everything but the basics to weather the storm.”

The future for retailers and their customers does not look merry and bright, according to a new survey. The University of Michigan and Reuters said yesterday that their monthly consumer confidence index fell to 57.6 in October, a relative measure of how shoppers feel and a record 12.7 points below September.

It is also 23.3 points below the same month last year. Since January, the index has fallen 41 percent, the largest drop on record and an indication that a long and deep recession is likely to occur, the report said.

Nearly 10 percent of consumers said they had problems obtaining credit, according to the survey. More families reported having less income in October than any other month in the past 50 years of the survey.

“The more the purchase was associated with the use of credit, the more likely consumers voiced their intent to postpone the purchase,” said Richard Curtin, director of the survey.

The flood of negative data is casting a shadow over the holiday season. Some industry experts are even forecasting a decline in spending this Christmas, when retailers rely on a boost in sales to pay for many of their expenses over the rest of the year.

Britt Beemer, chairman of America’s Research Group, a market research firm, predicts sales will fall by 1 percent, which would be the first decline in 23 years. Richard D. Hastings, consumer strategist for investment bank Global Hunter Securities, sees an even more dire scenario: sales dropping by 6 to 8 percent.

“This year is different,” he wrote in a presentation. “Rules are being ignored or revised as the industry passes through a threshold from which it will not return.”

And that’s the latest news on october’s retail sales plunge.

Tags: auto sales, barack obama, consumer spending, economy, retail sales, retail sales figures, retail sales plunge

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