US retail sales slump on post-‘clunker’ weakness - Business inventories shrink as companies clear stocks

US retail sales slump on post-‘clunker’ weakness - Business inventories shrink as companies clear stocks
By Alan Rappeport in New York
Copyright The Financial Times Limited 2009
Published: October 14 2009 14:14 | Last updated: October 14 2009 15:42
http://www.ft.com/cms/s/0/cdf0a750-b8ba-11de-809b-00144feab49a.html


US retail sales fell at the fastest rate this year in September as the expiration of the cash-for-clunkers rebate programme stalled the car buying frenzy.

Separately on Wednesday, official figures showed that businesses kept shedding inventories in August as they continue to cope with diminished consumer demand.

Sales fell by 1.5 per cent last month to $344.7bn, commerce department figures showed on Wednesday. In spite of the drop, the data was better than economists expected and sectors beyond the car market indicated consumers were showing signs of life.

Compared with a year ago, retail sales remain depressed, down by 5.7 per cent.

Car dealers saw sales plunge by 11.8 per cent from August to September after climbing by 8.8 per cent the previous month. However, excluding cars, retail sales were up by 0.5 per cent.

“The US consumer remains crucial to the fortunes of both the US and global economy and the latest numbers are therefore another important source of encouragement,” said Alan Ruskin, a strategist at RBS Greenwich Capital.

Most sectors notched monthly gains in September, led by furniture, grocery and department stores. Health and personal care stores and sporting goods also fared well last month and sales at petrol stations increased.

“While continued fiscal and monetary stimulus is still necessary for private demand to recover on a sustained basis, the consumer appears to be spending money again going into the holiday shopping season,” said Michael Woolfolk, a currency strategist at Bank of New York Mellon.

Weakness in the housing market continued to slow sales of building materials and garden equipment, which slumped by 0.2 per cent. In the last year, sales of those items have fallen by 13 per cent.

Economists are looking for a return of consumer spending, which accounts for about 70 per cent of economic activity in the US, to help overpower the hangover from recession. John Ryding and Conrad DeQuadros, of RDQ Economics, project that consumer spending will rise at an annual rate of 3.25 per cent in the third quarter, lowering the savings rate to 5 per cent.

Last week US retailers reported their first monthly sales gain since the financial collapse of September 2008, although most still saw lower sales than a year ago as shoppers remained focused on bargain hunting.

Meanwhile, business inventories fell by 1.5 per cent in August and were down by 13.3 per cent year-on-year. The monthly drop was fuelled by a 2.3 per cent decline at retailers, which benefited from the tail-end of the clunkers scheme.