Weak retail and factory data stir recession fear

The credit crisis that has raged for some 14 months has taken a heavy toll on consumer confidence and spending.

Excluding autos, retail sales were off 0.6 percent for September, double the 0.3 percent decline that economists had forecast. The housing downturn continued to weigh on sales of furniture and home furnishings, with sales of those items falling 2.3 percent, the sharpest decline since February 2003.

The sales declines were broad, covering everything from auto parts to clothing, department stores to online retailers. Even grocery sales, which had held up long after discretionary spending faded, fell 0.4 percent.

St. Louis Federal Reserve Bank President James Bullard told reporters in Little Rock, Arkansas, that the sales data suggested the economy in the third quarter was likely flat, at best, and could contract. "That is going to push up the probability that it will later be named a recession," he said.

Separately, the New York Fed's "Empire State" index of general business conditions tumbled in October to the lowest since its inception in 2001, hitting minus 24.62, This was below September's minus 7.41 and well under economists' median expectation of minus 10.0.

(Additional reporting by Doug Palmer and Mark Felsenthal in Washington, Alister Bull in Little Rock, Arkansas, and Nick Olivari and Richard Leong in New York; Editing by Jan Paschal)