Friday, November 14, 2008
The Commerce Department reported record declines in retail sales during the month of October in another dim reminder that the economic slowdown continues to worsen.
Retail sales in the U.S. dropped for the fourth consecutive month in October, down 2.8 percent overall, the biggest monthly decline since record keeping began in 1992. This exceeded the previous record set in November of 2001, just after the terrorist attacks.
The decline was paced by a 5.5 percent plunge in auto sales, following last month's 4.8 percent drop, however, declines were widespread with purchases excluding automobiles down 2.2 percent, also a record.
As shown below, auto sales are now down a whopping 22.2 percent from year ago levels with little hope of a significant rebound in the months ahead.
Nearly every sales category declined in October - furniture sales were down 2.5 percent, electronics sales fell 2.3 percent, and sporting goods sales fell 1.6 percent - however, gasoline station sales dropped more than any other, down 12. 7 percent for the month, bringing the year-over-year increase to just 0.4 percent.
Note that earlier in the year, when prices at the pump were rising, gasoline station sales had increased tremendously, lending support to the overall retail sales figures as other categories declined.
Since gasoline prices have plunged, these sales are now detracting from the headline number and should have an even bigger impact in the November report.
Some argue that excluding automobile and gasoline station sales paints a less dour picture of retail sales - down just 0.5 percent in October versus the headline 2.8 percent decline - however, this really is wishful thinking.
With the exception of food and health care, retail sales have slowed markedly over the last year, down about four percent in inflation adjusted terms even when excluding auto sales.
The tightening of credit and the pull-back in spending on discretionary items will continue to impact retailers for months to come.