Retail crash: Consumers cut back on nearly everything

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The government’s report today on December retail sales is a disaster, and the stock market is reacting in kind, with a blistering sell-off. The Dow industrials were down 253 points, 3%, to 8,195 at about 10:40 a.m. PST.

The headline retail sales number was bad enough: a 2.7% drop last month from November’s level, more than twice what analysts were expecting. It was the sixth straight monthly decline.

But the numbers were worse under the surface: Of the 19 retail subsectors tracked by the Commerce Department, 17 showed a drop in sales last month, seasonally adjusted. Consumers were cutting back on nearly everything, even as retailers were drastically marking down prices.

Some of the declines by retail sector:

-- Building materials/garden supplies: -2.9%

-- Department stores: -2.3%

-- Restaurants and bars: -2.2%

-- Online retailers: -1.9%

-- Furniture and home furnishings: -1.8%

-- Grocery stores: -1.3%

-- Electronics and appliances: -1.0%

-- Sports/hobby/book/music stores: -0.4%

‘Consumers are so worried about income security and so shellshocked by the destruction of their wealth, they have simply shut down spending and shifted into survival mode,’ wrote Bernard Baumohl, chief global economist at Economic Outlook Group in Princeton Junction, N.J., in a report today.

‘The priority in this instance is for households to preserve whatever income they receive and whatever savings is left,’ he said. ‘It is symptomatic of a catastrophic collapse in confidence among households who fear that even if Washington proceeds with a trillion dollar economic stimulus program, it will not have much of an impact on reviving jobs and income this year.’

The only two retail categories that saw rising sales last month: the ‘miscellaneous’ sector, up 0.5%; and drug stores and other health and personal care stores, up 0.4%.

‘We can only speculate that the worst economic downturn since World War II has caused many stressed out Americans to [visit] neighborhood drug stores for aspirins and stomach remedies,’ Baumohl said.

He meant it as a joke, but it probably isn’t.

-- Tom Petruno