Retail sales fall sharply in October

Retail sales plunged by the largest amount on record in October as the financial crisis and the slumping economy caused consumers to cut back sharply on spending.

The Commerce Department said Friday 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, including furniture and clothing, fell as consumers retrenched.

The 2.8% drop marked the fourth consecutive monthly decline in retail sales, the longest stretch of weakness on record, and was much bigger than the 2% economists had expected.

In a second report showing weakness, the government said businesses cut back on their inventories by 0.2% in September, the first decline since March 2007 and the biggest setback in more than three years.

Economists had expected a flat reading, and the drop could be a sign that businesses are trying to reduce stockpiles because of growing worries that sales will slump further in coming months.

The 5.5% plunge in auto sales was the biggest drop since August 2005. Carmakers reported that unit sales fell to the lowest level in 17 years as potential buyers stayed away from auto showrooms.

Excluding autos, retail sales fell by 2.2%, also a record decline, underscoring the widespread weakness last month.

The retail sales report showed that sales at general merchandise stores, the category that includes big chains such as Wal-Mart Stores Inc. and department stores, fell by 0.4%, while sales at specialty clothing stores were down 1.4%.

Sales at furniture stores dropped by 2.5%, and sales at appliance and sporting goods stores also showed declines.

One of the few areas to show an increase was the category that includes restaurants and bars, which posted a small gain of 0.3%.