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October Retail Sales Drop Fastest Pace Ever Heading into Holiday Shopping Season

By Mike Caggeso
Associate Editor
Money Morning

U.S. retail sales dropped 2.8% in October, the largest monthly drop since the Commerce Department began tallying monthly retail sales in 1992.

The sharp drop in consumer spending is largely the result of mounting job losses – with unemployment filings surging to 516,000 this week – and higher lending standards at banks.

“What you are seeing now is the turmoil in the credit and funding markets playing out into the consumer sector,” Kevin Flanagan, fixed income strategist, global wealth management at Morgan Stanley, told Reuters.

The sales drop marks the fourth consecutive monthly decline, as well as the first retrenchment since the first since 1992. Retailers are now hoping for a miracle as the holiday shopping season – the bread and butter of the retail industry – pokes its head around the corner.

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But all indications say that won’t happen. In the past month, retailers have gone bankrupt, posted sharp losses, lowered forecasts and announced to plans to cut costs as much as possible.

Also, consumer confidence is dangerously close to the 28-year low set in June, making a turnaround unlikely.

The Reuters/University of Michigan preliminary index, a measure of consumer sentiment, clocked in at 57.9 for November. June’s reading of 56.4 was the lowest since 1980.

And with consumer spending driving nearly two-thirds of the U.S. economy, that spells major trouble for the retail industry beyond the holiday season.

We won’t know for months whether we’re officially in a recession, but these fresh stats – and the ones that will follow until the fourth quarter closes – almost assuredly indicate we are. 

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More on this topic (What's this?)
Retail Sales Hit a Brick Wall (Wealth Daily, 11/14/08)
Retail Sales Plummet In October (Contrarian Profits, 11/14/08)
Retail Sales Down 2.8% in October (naked capitalism, 11/14/08)
Retail Sales Front Dominate During A Relatively Quiet Week (Contrarian Profits, 11/10/08)
Read more on Retail Sales at Wikinvest
November 14th, 2008

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This entry was posted on Friday, November 14th, 2008 at 7:02 pm and is filed under Mike Caggeso, Top News. You can follow any responses to this entry through the RSS 2.0 feed. Due to the amount of comments we receive Money Morning will not be able to respond to all questions. If you have not already registered to leave a comment, once doing so you will receive Money Morning's Daily Email.

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  1. Comment by Riley on 14 November 2008:

    This really isn’t that much of a surprise, although with the holidays coming, retail numbers should rebound. Online retailers in particular, those who advertise through comparison sites like Sortprice.com (http://www.sortprice.com) should do very well

  2. Pingback by U.S. Automakers, Freddie Mac and Foreign Exporters Next in Line for Bailout Handouts on 17 November 2008:

    [...] retailers).  Friday’s retail sales release was reported as a 2.8% decrease in October, the largest percentage decline on record.  While U.S. auto lots have been transformed into veritable ghost towns these days, the [...]

  3. Pingback by Will the Loss of Consumer Credit Serve as the Next Economic Aftershock to Further Fuel the Financial Crisis? on 17 December 2008:

    [...] Money Morning: October Retail Sales Drop Fastest Pace Ever Heading into Holiday Shopping Season. [...]

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