INSTANT VIEW: October retail sales suffer record decline

NEW YORK (Reuters) - Sales at retailers suffered a record decline in October, government data on Friday showed, as shoppers took fright over falling home prices and a widening credit crunch pushing the economy toward recession.

Federal Reserve Chairman Ben Bernanke said on Friday financial markets are under severe stress and central bankers around the world are ready to do more to ease credit strains and support faltering economic growth.

KEY POINTS

RETAIL SALES: * Sales slumped 2.8 percent last month to a seasonally adjusted $363.7 billion, the largest decline since the series began in 1992, the Commerce Department said. * The reading compares with a revised 1.3 percent fall in September, previously reported as a 1.2 percent decrease. * Economists polled by Reuters forecast a 2.0 percent fall in October retail sales. * Sales excluding autos notched a record 2.2 percent drop versus a forecast for a 1.2 percent decline.

BERNANKE COMMENTS: * "The continuing volatility of markets and recent indicators of economic performance confirm that challenges remain," Bernanke said in remarks prepared for delivery to a European Central Bank conference in Frankfurt. * "For this reason, policymakers will remain in close contact, monitor developments closely, and stand ready to take additional steps should conditions warrant," he said. * Bernanke said steps that central banks have taken to ease liquidity strains and ensure short-term dollar funding around the world have led to improvements in credit market functioning, although he described those gains as "tentative." * "Financial markets remain under severe strain," he said.

COMMENTS:

NIGEL GAULT, CHIEF U.S. ECONOMIST, GLOBAL INSIGHT, LEXINGTON, MASSACHUSETTS:

"You might have hoped, say gasoline was way, way down in price, that might free up money to spend on other stuff. But that didn't happen, people still spent less on other stuff. So that's not good.

"Is it going to be deflation in the sense that we're going to see the consumer price index falling? Absolutely, I believe we are... up to a point that's good news.

"Where you get to worry about deflation is if falling prices spread so widely throughout the economy...

"We're obviously in recession, and we're in what looks like a severe recession. But as of yet, to say that we're in a deflation... We're clearly in a deflation for commodities, that's totally clear. For the rest of the economy we're in a disinflation, i.e., the inflation rate is going down. But it's too strong to say yet that we're in deflation."

KIM RUPERT, MANAGING DIRECTOR, GLOBAL FIXED INCOME ANALYSIS, ACTION ECONOMICS LLC, SAN FRANCISCO:

"Retail sales were weaker than forecast although that was surely the risk.

"They kind of fulfilled the worst expectations in the market so we really haven't seen much more reaction in Treasuries. It looks like equities are little changed."

"It is certainly showing major retrenchment by the consumer over the last couple of months and even more excessive in October. It looks like there was some impact from weaker commodity prices as well, impacting, say, gasoline.

"It is consistent with indications that we are in recession and that the consumer has pulled back considerably."