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Retail sales plunge record 3.7 percent in November
Associated Press WriterWASHINGTON (AP) -- Retail sales plunged a record 3.7 percent in November as consumers, buffeted by huge job losses, terrorist attacks and a recession, got the holiday sales season off to a dismal start.
The Commerce Department said the record drop in retail sales followed a 6.4 percent upward surge in October, also a record. That big increase was caused by a huge jump in auto sales as Americans responded eagerly to the free financing offers that dealers used to get shoppers back into showrooms following the Sept. 11 terrorist attacks.
However, in more positive news Thursday, the Labor Department reported that the number of Americans filing first-time claims for unemployment benefits fell by 86,000 last week.
It was the biggest decline in weekly jobless claims in nine years and provided reason to hope that the huge wave of layoffs that occurred following the terrorist attacks may be abating. The big decline left total new claims at 394,000 last week.
The country's first recession in a decade is keeping a lid on inflation. A third report showed that wholesale prices fell for a second consecutive month, dropping 0.6 percent in November after a bigger 1.6 percent plunge in October.
The November decline was led by another big drop in energy prices, which offset rising prices for autos and tobacco. Outside of food and energy, the "core" rate of wholesale inflation was up 0.2 percent in November after having dropped 0.5 percent in October.
The retail sales report showed that auto sales, which had surged 24.2 percent in October, fell 11.9 percent in November.
Even without the wide swing in auto sales, retail sales would have been weak last month, dropping by 0.5 percent following a 0.8 percent rise outside of autos in September.
Consumer spending, which accounts for two-thirds of total economic activity, is being closely watched for signs of how the economy is faring during its first recession in a decade.
The concern is that the nearly 800,000 job layoffs that have occurred in the past two months will trigger sharp cuts in spending and make the current downturn deeper and more severe than the mild recession most economists are now forecasting.
The government had reported last week that unemployment shot up to 5.7 percent in November, a six-year high, as a wide swath of industries, led by travel-related businesses such as airlines and hotels, laid off an additional 331,000 workers last month.
The National Bureau of Economic Research declared recently that the country's record-long economic expansion had ended in March and the first recession since the 1990-91 downturn had begun.
Many economists say the current recession will be relatively mild and end by sometime next spring. However, forecasters readily admit that their economic models have no way of accounting for the unprecedented situation: a recession combined with the worst terrorist attacks in U.S. history, a war being waged in Afghanistan and anthrax letters turning up in the mail.
The Federal Reserve cut interest rates Tuesday for an 11th time this year, pushing rates to the lowest level in 40 years. Economists are hoping this aggressive credit easing and a stimulus bill that has yet to make it through Congress will provide the necessary fuel to power an economic recovery next year.
The retail sales report showed that sales, after adjusting for seasonal variations, totaled $293.6 billion last month.
In addition to the big slump in auto sales, general merchandise stores reported a drop of 0.1 percent in November sales.
Last week, the country's biggest retail chains had reported that their November sales had gotten the holiday season off to a lackluster start.
Sales at gasoline stations were down a big 6.3 percent, a drop that largely reflected falling gasoline prices. Sales at hardware stores were off 0.2 percent but sales at furniture dealers showed a strong 2.6 percent increase.