Retail sales plunged by the largest amount on record in October as the financial crisis and the slumping economy caused consumers to sharply cut back on their spending, according to an Associated Press report.
The Commerce Department said Friday (Nov. 14) that retail sales fell by 2.8% last month, surpassing the old mark of a 2.65% drop in November 2001 in the wake of the terrorist attacks that year.
The decline in sales was led by a huge drop in auto purchases, but sales of all types of products from furniture to clothing fell as consumers retrenched.
The 2.8% drop marked the fourth consecutive monthly decline in retail sales and was much bigger than the 2% fall economists expected.
The weakness was led by a 5.5% plunge in auto sales, the biggest drop since August 2005. Auto companies reported unit sales fell to the lowest level in 17 years as potential buyers, frightened by all the turmoil on Wall Street, stayed away from auto showrooms.
Excluding autos, retail sales fell by 2.2%, also a record decline, underscoring the widespread weakness last month.
Consumer spending accounts for two-thirds of total economic activity and weakness in this area was the major factor dragging down overall economic growth in the July-September quarter.
The gross domestic product fell 0.3% at an annual rate during the third quarter, the strongest signal yet that the country has fallen into a recession.