Sales at retailers suffered a record decline in October, government data on Friday showed, as shoppers reined in spending with home prices falling, although plunging gasoline prices also reduced outlays by consumers.
Sales slumped 2.8% last month to a seasonally adjusted $363.7 billion, the largest decline since the series began in 1992, the U.S. Commerce Department said. This compared with a revised 1.3% fall in September, previously reported as a 1.2% decrease.
"What you are seeing now is the turmoil in the credit and funding markets playing out into the consumer sector," said Kevin Flanagan, fixed income strategist, global wealth management at Morgan Stanley in Purchase, New York.
U.S. stock index futures were lower after the report, bonds were steady and the U.S. dollar dipped briefly against the yen before pushing back to levels before the data was released.
Economists polled by Reuters forecast a 2.0% fall in October retail sales as an escalating financial crisis forced consumers into a defensive crouch. Retail sales last month were down 4.1% from a year ago.
Sales excluding autos also notched a record 2.2% drop in October versus a forecast for a 1.2% decline.
Lower gas prices as the cost of crude oil retreated sharply from a July peak around $147 a barrel helped depress sales at gasoline stations by a record 12.7% in October.
This left a closely watched core measure of retail sales excluding autos and gasoline down by 0.5% in October.
"Take our cars and gas, it's a drop of half a%. It's not good, but it's not horrific. This could have been worse; it's encouraging that it wasn't," said David Resler, chief economist at Nomura Securities in New York.
Individual car makers have reported a collapse in sales since mid-September after auto-loan terms tightened sharply in the aftermath of investment bank Lehman Brothers failed.
The Commerce Department said motor vehicle and parts sales slide 5.5% in October after a 4.8% September fall. October's performance for this category was the weakest since August 2005, when car sales were off 10.3%.
Furniture and home furnishing sales dropped 2.5% in October, reflecting depressed conditions in the U.S. housing sector, whose collapse last year sparked the credit crunch that has taken a heavy toll on the hitherto robust consumer sector.
Analysts had been braced for bad news from the retailers after a series of bleak profit forecasts from a sector that is being forced to adjust fast to deteriorating conditions.
Circuit City Stores Inc, the No. 2 U.S. consumer electronics retailer, filed for bankruptcy on Monday just weeks before the start of the crucial holiday shopping season, as its vendors tightened credit and shoppers closed their wallets.
In addition, U.S. chain store sales plunged in October to the lowest level in the series' 35-year history as customers sought to save money by trading down to cheaper discount stores. Wal-Mart Stores Inc, the world's largest retailer, reported a better-than-expected 2.4% rise in sales last month.
A separate report from the Labor Department showed U.S. import prices posting the largest monthly drop since 1988 in October as the cost of imported oil weighed on the numbers for the third consecutive month.
Overall import prices declined 4.7% after falling by a revised 3.3% in September. But for the 12 months through October import prices were still up 6.7%.
Petroleum prices tumbled 16.7% after falling a revised 10.2% the previous month.
