Filed by KOSU News in Business.
October 14, 2009

Retail sales declined in September by the largest amount this year as car sales plummeted following the end of the government’s popular Cash for Clunkers program. But outside of autos, sales were better than expected.

The Commerce Department said Wednesday that retail sales dropped 1.5 percent last month. That’s smaller than the 2.1 percent fall economists had expected, but still the biggest setback since sales dropped 3.2 percent in December.

Car sales plunged 10.4 percent, but excluding autos, retail sales rose 0.5 percent. That’s better than the 0.2 percent increase analysts expected.

Consumer demand, which accounts for 70 percent of total economic activity, is being watched closely by economists who worry that any recovery from the recession could stall due to rising unemployment and tight credit conditions.

Analysts believe the overall economy, as measured by the gross domestic product, is growing in the second half of this year at an annual rate of 3 percent or more. But the concern is that growth rate could slip sharply next year if consumer spending falters.

The 1.5 percent drop in retail sales in September followed a 2.2 percent surge in August, which was revised down from an initial estimate of 2.7 percent.

Demand for new cars surged in August as buyers rushed to take advantage of the government’s incentives of up to $4,500 to trade in old models for more fuel-efficient cars under the clunkers program that wrapped up at month’s end. Copyright 2009 The Associated Press