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Retail Sales Drop Record 2.8 Percent In October

U.S. retailers saw a record drop in sales in October, the Commerce Department said Friday, as tighter credit and the faltering economy spooked consumers into sharp cutbacks in their spending.

Retail sales fell by 2.8 percent last month, led by a huge drop in auto sales. It was the largest decline since the index began in 1992. The previous record was a 2.65 percent drop in November 2001.

In September, sales fell by a revised 1.3 percent, a figure that was previously reported as a 1.2 percent decrease.

The weakness was led by a 5.5 percent plunge in auto sales, with carmakers reporting unit sales falling to their lowest level in 17 years. Excluding autos, retail sales fell 2.2 percent, also a record decline.

The report shows that sales at general merchandise stores such as Wal-Mart fell 0.4 percent, while sales at specialty clothing stores were down 1.4 percent. Sales at furniture stores dropped by 2.5 percent, with sales at appliance stores and sporting goods stores also showing declines.

Consumer spending accounts for two-thirds of total economic activity. The gross domestic product fell 0.3 percent at an annual rate during the third quarter, the strongest signal yet that the country has fallen into a recession.

Many economists believe the GDP will drop by an even bigger amount in the current October-December period and will continue falling through the first two quarters of next year, likely sparking the worst recession since the 1981-1982 downturn.

The government reported last week that the unemployment rate shot up to 6.5 percent in October, and many economists believe it will top 8 percent before the economy starts to mount a sustained rebound.

From wire service reports

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