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EDITIONS
Thursday, 13 December, 2001, 16:04 GMT
US retail sales plunge
Shopping mall
Slower business in the malls
US retail sales in November recorded their steepest ever fall, the Commerce Department has said.

The 3.7% fall in retail sales, the largest since records began in 1992, followed a record 6.4% rise in October.

It was a much larger decline than most economists had predicted, with slumping car sales the key factor.

Analysts said the deteriorating retail performance dampens hopes that the struggling US economy is already fighting its way out of recession.

Consumer spending accounts for two thirds of all economic activity in the US.

Very soft

"I think the decline in autos was expected. The interesting thing is the decline in retail sales ex autos, and that suggests consumer spending in the fourth quarter will be weaker than it was in the third quarter," said Kevin Grice of American Express Bank.

Kevin Logan, chief market economist with Dresdner Kleinwort Wasserstein in New York, said: "The retail sales data are weak, revised down in October and much weaker than anticipated in November, even with the drop in gasoline sales. Spending is very soft."

Car sales had led the surprise increase in retail spending in October, boosted by cheap financing deals designed to lure consumers back to showrooms after the 11 September attacks.

Jobs outlook improves

The downbeat retail sales figures for November were partially offset by an unexpected dip in the number of people claiming unemployment benefit, and encouraging inflation data.


Things seem to be not as bad as they looked in October

Robert McGee, chief economist, Tokai Bank

The number of new unemployment benefit claims fell 18% in the week to 8 December, the sharpest weekly decline in nine years, the US Labor Department said.

The drop in new claimants suggests that a round of corporate lay-offs that began earlier this year and accelerated in the wake of 11 September may be coming to an end.

Robert McGee, chief economist at Tokai Bank Ltd said the recent surge in redundancies was "an overreaction".

"Things seem to be not so bad as they looked in October," he added.

Inflation subdued

Meanwhile, the price of goods leaving US factories posted a greater than expected decline of 0.6% during November, signalling that the US Federal Reserve has scope for further interest rate cuts.

The dip in producer prices was due mainly to lower energy costs and a seasonal decline in food prices.

Excluding food and energy, producer prices edged up by just 0.2%.

US interest rates have already been cut 11 times this year, bringing rates down to a 40-year low 1.75% from 6.5% at the beginning of the year.

Reducing the cost of borrowing is intended to encourage consumers and companies to keep spending, stimulating economic growth.

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See also:

13 Dec 01 | Business
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