Story URL: http://news.medill.northwestern.edu/chicago/news.aspx?id=100915
Story Retrieval Date: 3/7/2014 5:34:17 AM CST
Retail sales fell 1.2 percent in September, off the analysts’ estimate of a 0.7 percent decline. Most experts say diminished consumer spending could continue well into 2009.
Total retail and food sales adjusted for seasonal variation slumped to $375.5 billion in September from $379.9 billion in August, and down 1 percent from the year-earlier total of $379.4 billion, the Bureau of Labor Statistics reported.
Motor vehicle and parts sales were the weakest, responsible for dragging down the overall figures. Excluding autos, retail sales dropped only 0.6 percent in September, but that was still double the analysts’ estimate of a decline of 0.3 percent. Though year-to-year sales were down, if auto sales were excluded, there would have been a 3.6 percent increase.
The auto industry was hit by a 3.8 percent sales decrease in September to $64.9 billion from $67.5 billion in August. It suffered an 18.5 percent loss from last September.
Adolfo Laurenti, senior economist at Mesirow Financial Interim Management LLC, said, "Since the third quarter of 2007 it's been a one-year recession for auto makers. People are stepping back from the larger items."
Sales were down in most major retail categories including furniture stores, electronics and clothing stores. There were slight gains in health and personal care stores and gasoline stations. Gasoline had only a 0.06 percent increase from August. Sales for health and personal care rose 0.4 percent.
Consumer spending wavered more in late September than early in the month, said Laurenti, and this points toward another disappointing report next month when October sales are released.
“The outlook is not good," Laurenti went on. "If we look at the year-over-year comparison, these numbers have been negative for three months in a row now beginning in July, through August and September. The quarter-over-quarter is down 1 percent which means we are very likely going to have negative growth of consumption in the third quarter and likely negative numbers for the real GDP,” or gross domestic product.
According to Laurenti, the rule of thumb for a recession is three consecutive quarters of negative numbers.
Economists polled by Bloomberg predict that consumer spending will drop 0.9 percent this quarter and again in the first three months of 2009.
People are spending less and saving more and the motivating factor for conservative spending seems to be fear, according to a report by First Trust Portfolio LP economists.
“Consumer spending is declining, driven by fear of the financial unknown and a lack of credit for big-ticket items,“ said Chief Economist Brian Wesbury.
Interviewed on the L Wednesday morning, Brian Sanders, a 23-year-old from the South Side, said he has already significantly cut his spending habits because “retail prices are going up, food costs more, no one can afford anything anymore. They have to take care of the necessities and that’s getting hard.”
However, experts at First Trust said retail sales could rebound in November and December due in part to the government's $700 billion bailout of financial institutions.
“Clogs in the arteries of the credit system are preventing some of that purchasing power from being spent, at present,” said Wesbury. “Recent government actions are going to help unclog those arteries, resulting in an eventual surge in sales, as consumers play catch up much like they did after 9/11.”