* Retail sales drop 2.8 percent in Oct
* Nov consumer confidence up to 57.9 from 57.6 in October.
* Import prices down 4.7 percent in Oct
(Updates with closing market levels in New York)
By Alister Bull
WASHINGTON, Nov 14 Sales at U.S. retailers
suffered a record decline in October as fears of recession
sapped spending, but part of the drop was due to slumping
gasoline prices which helped buoy consumer confidence.
The Commerce Department said on Friday that retail sales
slumped 2.8 percent in October to a seasonally adjusted $363.7
billion, the largest decline since the department's current
methodology was adopted in 1992, as mounting unemployment hit
A separate Reuters/University of Michigan November survey
of consumers showed that confidence unexpectedly rebounded from
a record October drop as tumbling gas prices offset worries
about the economy.
While lower gas prices were welcome, declines in a broad
number of retail sales categories showed consumers were still
on the defensive.
"What you are seeing now is the turmoil in the credit and
funding markets playing out into the consumer sector," said
Kevin Flanagan, fixed income strategist, global wealth
management at Morgan Stanley in Purchase, New York.
Consumer spending is a crucial driver of U.S. growth and
stocks fell sharply, with the Dow Jones industrial average
.DJI ending 337.94 points, or 3.82 percent lower at
The dollar rose, aided from its role as a safe haven in a
deteriorating global investment climate, while U.S. Treasury
notes advanced in price for the same reason and because a
weaker economy theoretically favors such fixed income assets.
Economists polled by Reuters forecast a 2.0 percent fall in
October retail sales as the escalating financial crisis took a
toll on consumers. Retail sales last month were down 4.1
percent from a year ago.
Sales excluding autos fell a record 2.2 percent in October
versus a forecast of a 1.2 percent decline.
Lower gasoline prices, as crude oil retreated sharply from
a July peak around $147 a barrel, helped depress sales at gas
stations by a record 12.7 percent in October. As a result, a
closely watched core measure of retail sales excluding autos
and gasoline fell 0.5 percent in October.
"Take out cars and gas, it's a drop of half a percent. It's
not good, but it's not horrific. This could have been worse;
it's encouraging that it wasn't," said David Resler, chief
economist at Nomura Securities in New York.
The sharp drop in gasoline station sales may also have
reflected fewer miles driven by Americans last month.
The Reuters/University of Michigan Surveys of Consumers
said its confidence index edged up to 57.9 in November from
57.6 in October. Despite the rise, sentiment remains at
depressed levels, with the index below the lowest levels hit
during the depths plumbed during the last two recessions.
"Lower gas prices and sizable discounts at retailers helped
to slightly improve consumers' assessments of current economic
conditions, while higher unemployment and a deepening recession
dimmed their expectations for future gains," the Surveys of
Consumers said in the report.
"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," said Nigel Gault, chief U.S. economist at
Global Insight in Lexington, Massachusetts.
Lakshman Achuthan, managing director at the Economic Cycle
Research Institute, a New York-based independent forecasting
group, put it more bluntly: "Not only is no economic recovery
on the horizon, but the economy is falling off a cliff at its
fastest pace in at least six decades.
Individual car makers have reported a collapse in sales
since mid-September after auto-loan terms tightened sharply in
the aftermath of investment bank Lehman Brothers's failure.
The Commerce Department said motor vehicle and parts sales
slide 5.5 percent in October after a 4.8 percent September
fall. October's performance for the category was the weakest
since August 2005, when car sales were off 10.3 percent.
Majority leader Sen. Harry Reid, a Democrat from Nevada,
said he "plans to press forward" with emergency aid to American
automakers and will begin debate on Monday of a $25 billion
bailout. It was not clear if there was sufficient backing from
Republicans to deliver the emergency aid.
General Motors Corp (GM.N), Ford Motor Co (F.N) and
Chrysler LLC [CBS.UL] are furiously lobbying for $25 billion in
immediate bailout money to help them survive the industry's
worst financial crisis.
A report from the Labor Department showed U.S. import
prices posted the largest monthly drop since 1988 in October as
the cost of imported oil slid.
Separate Commerce Department data showed that stocks of
unsold goods at U.S. businesses unexpectedly fell a seasonally
adjusted 0.2 percent in September.
(Additional reporting by Lucia Mutikani in Washington and
Burton Frierson in New York; Editing by Chizu Nomiyama)