Consumers Slash Spending

Consumers, taking a beating from the worst financial crisis in 70 years, sharply cut back spending in October, pushing retail sales down by a record amount.The Commerce Department reported Friday that retail sales fell by 2.8 percent last month, surpassing the record 2.65 percent plunge in November 2001 following the terrorist attacks.The October sales decline was led by a huge fall in auto purchases, but sales of all types of products suffered as consumers, worried about their jobs and market turbulence, reduced spending.The dismal report on retail sales was worse than the 2 percent decline that analysts expected. It marked the fourth straight decrease, the longest stretch of weakness on record.
Retailers are braced for what could be the worst holiday shopping season in decades with economists forecasting a recession that could turn out to be the steepest since the 1981-82 downturn.A survey of the nation's big chain retail stores found that retailers suffered through the weakest October in at least 39 years even though they tried to gin up more sales through frenzied price-cutting.Connecticut retailers aren't suffering as much as those in other parts of the nation, said Peter Gioia, who tracks the economy for the Connecticut Business and Industry Association, but some smaller stores are struggling even as the holiday shopping season begins. "I don't think it's going to be a total bust, but a lot of local retailers are going to feel it," Gioia said. "The situation is worse in Fairfield County. There are a lot of people who work in New York City, and right now New York is a basket case. They're cutting back."In the 2001 recession, the consumer did not go into recession. Consumer spending was there. Manufacturing and IT got clobbered, but the consumer didn't."As President George W. Bush and other world leaders gathered for a weekend summit to search for ways out of the current financial crisis, Federal Reserve Chairman Ben Bernanke hinted at another interest rate cut.Bernanke said financial markets remain under "severe strain" in a speech to a central banking conference in Frankfurt, Germany. He pledged to continue working with other countries to deal with the crisis and left open the door to a fresh interest rate cut to help brace the sinking U.S. economy.Bush is hosting a leaders' summit of the Group of 20, which includes not only the world's wealthiest nations but also major developing countries such as Russia, China, Brazil and India. The G-20 leaders are meeting in Washington for two days of talks that will wrap up Saturday.