Washington: US retail sales slumped 1.2% in September as consumer pulled back in the face of a financial market storm and tight credit, government data showed Wednesday.
The drop in sales was the steepest since August 2005 and weaker than market expectations for a 0.7% drop.
A major factor was weak auto sales, which plunged 8.4% year-over-year and 3.75 % in the month.
But even excluding autos, retail sales were down a hefty 0.6% in September, the Commerce Department report showed.
“This is a very weak quarter and certainly one headed for negative (economic) growth,” said Robert Brusca at FAO Economics.
The US economy grew at an estimated 2.8% pace in the second quarter but analysts say the figure was skewed by a one-time government stimulus that boosted spending, which accounts for about two-thirds of US economic activity, as well as strong exports.
Many analysts say the economy is headed for a downturn as a credit crisis stemming from a housing market meltdown impacts the rest of the economy.
“The consumer is retrenching,” analysts at Briefing.com said in a note on the retail report.
“The drops were not a result of weaker gasoline sales, as that component rose fractionally. These data are not hard to analyze. They are poor from an economic standpoint. Of greatest concern is that the extremely negative sentiment surrounding the ‘economic crisis´ and declines in stock values will lead to further consumer caution in the months ahead.”