Bob Willis and Timothy R. Homan
Wednesday, October 15, 2008
Oct. 15 (Bloomberg) — The eroding U.S. economy drove retail sales into their longest slump in at least 16 years, even before this month’s market collapse signaled a deepening recession.
Consumer purchases fell 1.2 percent in September, extending the decline to three straight months, the first time that’s happened since comparable records began in 1992, Commerce Department figures showed today. In another sign of weakening demand, prices paid to U.S. producers fell last month on lower fuel costs.
Sales are slowing just as merchants prepare for the holiday selling season, on which they depend for the largest share of their revenue. San Francisco Federal Reserve President Janet Yellen said yesterday the U.S. may already be in a recession, and stocks dropped amid concern that the government’s plans to inject capital into banks won’t halt the economy’s decline.
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“I don’t think things can get much worse,” said Brian Bethune, chief financial economist at Global Insight Inc. in Lexington, Massachusetts. “September was a terrible month in terms of the overall situation, in both sales and production. The fourth quarter is guaranteed to be a terrible quarter.”
An early regional gauge of manufacturing for this month showed production weakening in New York state as the freeze in global credit markets prompted businesses to pull back. The Federal Reserve Bank of New York’s general economic index sank to the lowest level since it was first compiled in 2001.
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The Labor Department reported that prices paid to U.S. producers fell 0.4 percent in September, while so-called core producer prices that exclude fuel and food increased 0.4 percent.
Falling oil prices and weaker consumer spending are making it harder for American companies to raise prices, giving the Fed scope to cut interest rates. Still, the costs for food and other household goods are higher than a year ago.