US retail sales fell 2.4 percent in September, the largest drop in almost 10 years of record-keeping and a sign last month's terrorist attacks may have halted the record economic expansion.
"[Friday's] decline in sales confirms that we are in recession," Joseph Stiglitz, winner of this year's Nobel Memorial Prize in Economic Sciences, said at a press conference.
PHOTO: AP
The Sept. 11 attacks on New York and Washington transfixed consumers and led to layoffs and firings as business slowed. That hurt sales at General Motors Corp, Nordstrom Inc department stores, LongHorn Steakhouse restaurants and elsewhere.
The drop in spending, led by fewer purchases of automobiles, clothing and restaurant meals, brought sales to US$286.5 billion, the lowest since December 2000.
At the same time, prices paid to producers unexpectedly increased for a second straight month in September, led by higher energy and automobile costs, the Labor Department said. The 0.4 percent gain in the producer price index followed a similar increase in August. The core index, which excludes food and energy, rose 0.3 percent in September after falling 0.1 percent in August.
Analysts expected no change in producer prices last month, according to the median of 51 forecasts in a Bloomberg News survey. Even with September's increase, the rise in prices of finished goods during the first nine months this year was a third of the January-September 2000 pace. Sluggish economic growth has pushed down the costs of commodities and prompted businesses to reduce prices to bolster sagging demand.
Sales had risen 0.4 percent in August. Excluding automobiles, sales fell 1.6 percent in September after rising 0.6 percent in August.
The larger-than-expected decline in sales has added urgency to efforts by lawmakers to boost the economy, which grew in the second quarter at a 0.3 percent annual rate, the slowest in eight years. Most economists say the US probably has slipped into recession, the first after an unprecedented decade of growth.
House Republicans today drafted a US$100 billion measure to stimulate a recovery through tax breaks to corporations. Still, consumer spending accounts for two-thirds of gross domestic product, and a confidence survey released on Friday suggests Americans were starting to bounce back.
The University of Michigan's index of consumer sentiment rose to 83.4 in October, the first increase since June, after dropping to 81.8 in September. The university's preliminary index of current economic conditions was 92.1, down from 94.6 in September.
The numbers are preliminary.
``It will take more gains to revive spending,'' said Christopher Low, chief economist at First Tennessee Capital Markets in New York.
Stocks were mixed and US Treasury securities reversed earlier declines. Investors expressed concern that retailer profits would suffer. The drop in the Dow Jones Industrial average countered worries in the Treasuries market that accelerating inflation would reduce the likelihood of more interest rate reductions by Federal Reserve policy makers.
The Dow fell 66 points, or 0.7 percent, while the NASDAQ Composite Index rose 1.7 points, or 0.1 percent. The 5 percent Treasury note maturing in August 2011 rose 1/8 point, pushing down its yield a basis point to 4.65 percent.
While some analysts expect zero-interest financing by automakers and discounting at retailers to boost sales this month, some retailers say the US military action that started this week against Afghanistan may also distract shoppers.
"If it's anything like the Gulf War, if people react the same way, it's going to affect sales because people will stay home and watch the war on TV, as they did back in 1991," said Ira Kaplan, chief financial officer of the fashion retailer Claire's Stores Inc, in an interview with Bloomberg Television.
When Operation Desert Storm began in January 1991, retail sales fell 2.2 percent during the month. That was the largest decline since January 1987.
Commerce Department statisticians said the report included changes to its usual process of making seasonal adjustments so that the numbers would reflect the effect of Sept. 11.
Sales that took place before 1992 can't be verified. The Commerce Department switched to a new method for computing retail sales figures this year and revised the data back to February 1992.
Department stores fell 1.6 percent after showing no change in August. Sales at clothing and accessory stores fell 5.9 percent last month after a 0.9 percent decrease in August.
Sales of electronics, appliances, furniture, building material and garden supplies all fell after rising in August.
Car dealers also suffered as their sales fell 4.6 percent last month. Total sales fell 2.8 percent in September at General Motors and dropped 9.7 percent at Ford Motor Co, compared with September 2000, the companies reported previously.
Sales at restaurants and bars decreased 5.1 percent last month after rising 1.2 percent in August, Friday's report showed.
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