Retail sales, producer prices fall in November

Consumers reduced their spending at retail stores again in November while the cost of goods before they reach store shelves continued to drop, more bad signs in a recession that appears to be deepening.

Businesses also cut their inventories by the largest amount in five years, the government said Friday, a sign that the recession will force further cuts in production.

The Commerce Department reported that retail sales dropped by 1.8% in November. The decline, which was slightly below the 1.9% decrease that had been expected, was the fifth straight monthly drop, a record stretch of weakness.

The downturn was led by a 2.8% fall in auto sales, which had been expected since automakers had reported that November was their worst sales month in more than 26 years.

The producer price index, which tracks the cost of goods before they reach consumers, fell 2.2% last month as gasoline and other energy prices retreated, according to the Labor Department. That followed a record 2.8% plunge in wholesale prices in October. November’s price drop was larger than the 2% decline economists had expected.

Falling prices might sound good for buyers, but a prolonged, widespread decline would do serious economic damage, dragging down incomes, clobbering home prices even more and shrinking corporate profits.

The Commerce Department also said businesses slashed the inventories by 0.6% in October, three times the 0.2% decline that economists expected. It was the biggest cut in inventories since August 2003.

When companies are reducing their stockpiles because they are worried about future sales, it can further depress overall economic growth.