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WASHINGTON - US retail sales slumped 1.2 percent in September, government data showed Wednesday in a sign of deeper troubles for an economy ailing from a financial market firestorm and tight credit.
The drop in sales was the steepest since August 2005 and weaker than market expectations for a 0.7 percent decline.
Ian Shepherdson, economist at High Frequency Economics, said the report was even more grim because it covered a period before the worst of the financial market turmoil.
"There can be no doubt now that the economy is in recession," he said. "It will be there a while."
A major factor was weak auto sales, which plunged 8.4 percent year-over-year and 3.75 percent in the month.
But even excluding autos, retail sales were down a hefty 0.6 percent in September, the Commerce Department report showed.
"People have dropped shopping. This happened even before the total meltdown in the stock markets. What is ominous is that the declines in spending were broad-based," said Joel Naroff at Naroff Economic Advisors.
"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 percent 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."
Marie-Pierre Ripert, economist at Natixis, said the underlying details are even weaker than the headline figure suggests, with "core" retail sales excluding gasoline, building materials and autos down 0.7 percent, "suggesting a strong downward adjustment in consumer spending as the fiscal stimulus fades."
- AFP /ls
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