INSTANT VIEW: Retail sales fall 2.7 percent in Dec

NEW YORK (Reuters) - Sales at retailers fell at a steeper-than-expected rate in December, government data showed on Wednesday, as a deteriorating economic environment forced consumers to cut back on spending during the key holiday period.

KEY POINTS: * The Commerce Department said total retail sales fell 2.7 percent to a seasonally adjusted $343.2 billion last month following a revised 2.1 percent drop in November, previously reported as a 1.8 percent decline. * December's drop was the biggest since October last year when sales fell 3.4 percent. * For the whole of 2008, sales eased 0.1 percent, the department said. * Excluding motor vehicles and parts, sales were down a record 3.1 percent after a revised 2.5 percent decline in November, previously reported as a 1.6 percent drop, the department said * Total sales, excluding autos, rose 3.0 percent in 2008. * Analysts polled by Reuters had forecast December retail sales falling 1.2 percent. * Excluding motor vehicles, sales had been expected to drop 1.3 percent. * Gasoline sales tumbled 15.9 percent after diving by a record 18.3 percent in November.

COMMENTS:

MARC PADO, U.S. MARKET STRATEGIST, CANTOR FITZGERALD & CO, SAN FRANCISO:

"Bad ugly and worse. The problem here is that these are month over month numbers and there were big downward revisions to November. As bad as they are, they are worse than they appear because November was worse than reported. Everyone was bracing for bad numbers. I don't even think the consensus was the consensus here. What really undermined the market was the revision."

SUBODH KUMAR, CHIEF INVESTMENT STRATEGIST, SUBODH KUMAR & ASSOCIATES, TORONTO:

"The retail numbers were weak, but we've had some signals of that earlier on, with the larger stores indicating that sales were less than expected. I think the retail and unemployment numbers suggest that equity markets will remain volatile through the first half of the year. From the point of view of central bank policy, rates are low, but they have to remain accommodative.

"The banks are related to retail, they both suggest that the consumer is weak. Bank problems are related to mortgages. I don't focus on individual banks, but I don't think the market can go very far without stronger banks participating. I think leadership needs to come from the banks, and as stronger banks get stronger throughout the year, the weaker banks will start to disappear. Right now, it's not clear that the stronger banks have emerged into leadership positions, that's part of the problem the markets are having. The signpost will be strength from the well-capitalized banks, which we haven't seen yet."

KEVIN LOGAN, SENIOR U.S. ECONOMIST, DRESDNER KLEINWORT, NEW YORK:

"It is worse than anticipated and a lot of that is in gasoline. Gasoline is down 16 percent but what we are really interested in now is when we take out gasoline and automobiles, and sales are down quite a lot. Sales are down five months running and this is the biggest drop of those five months, so it caps a long stream of negative numbers. In the background we know that consumers and households are responding to the massive loss in wealth that is unprecedented."

JIM DEMASI, CHIEF FIXED-INCOME STRATEGIST, STIFEL NICOLAUS & CO. INC:

"This shows the damage from the dislocation in the credit markets in the fourth quarter. It's starting to flow through in a very significant way. The economy is staring at a very steep, downward trajectory. This shows a very sharp falling in household wealth and job creation. This shows a shock in consumer confidence.

"The poor economic data are going to overwhelm other factors that would be bond negatives such as supply. We have not seen the cyclical lows in rates along the Treasury curve. It's not going to happen until the second quarter."

SCOTT BROWN, CHIEF ECONOMIST, RAYMOND JAMES & ASSOCIATES, ST PETERSBURG, FLORIDA:

"The report is clearly worse than expected. It's a pretty bad wipeout. Even excluding autos and gasoline, you were still down 1.5 percent. It is consistent with the view that this is probably comparable to the big recessions we had in the 1970s and 1980s. Treasuries reaction has been very positive. We had already seen a safe haven bid out of equities and these data have really hammered the stock futures in the U.S."

SACHA TIHANYI, ASSOCIATE CURRENCY STRATEGIST, SCOTIA CAPITAL, TORONTO: