Consumers cut back, hurting retail sales

Retailers suffered through the weakest October in at least 39 years.

WASHINGTON (AP) — Consumers, taking a beating from the worst financial crisis in seven decades, cut back sharply on their spending in October, pushing retail sales down by a record amount.

As President George W. Bush and other world leaders gathered for a weekend summit to search for ways out of the mess, Federal Reserve Chairman Ben Bernanke hinted at another interest rate cut.

Bernanke said financial markets remain under “severe strain” in a speech to a central banking conference in Frankfurt, Germany.

He pledged to continue working with other countries to deal with the crisis and left open the door to a fresh interest rate cut to help brace the sinking U.S. economy.

The Commerce Department reported Friday that retail sales fell by 2.8 percent last month, the biggest drop on record, surpassing the old mark of a 2.65 percent plunge in November 2001 that occurred after the terrorist attacks.

The October sales decline was led by a huge fall in auto purchases, but sales of all types of products suffered as consumers, worried about their jobs and the market turbulence, cut back sharply on spending.

The dismal report on retail sales was worse than the 2 percent decline that analysts expected. It marked the fourth-straight decrease, the longest stretch of weakness on record.

Retailers are braced for what could be the worst holiday shopping season in decades with economists forecasting a recession that could turn out to be the steepest since the 1981-82 downturn.

A survey of the nation’s big chain retail stores found that retailers suffered through the weakest October in at least 39 years even though they tried to gin up more sales by a frenzied round of price cutting.

Elsewhere Friday, three mayors pressed the federal government to use a portion of the $700 billion financial bailout plan to help large U.S. cities with pension costs, infrastructure investment and cash-flow problems stemming from the global financial crisis.