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October 15th, 2008

Retail Sales: Just One Sign of the Times

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Retail sales dipped a more-than-expected 1.2% in September, following a 0.4% decrease in August. September’s report represents the largest decline in retail sales in over three years. Only drug stores and gas stations posted positive sales in the ninth month.

What caused such a dramatic drop in retail sales? First, and most obviously, was a steep drop in consumer spending, or should we say, the consumer’s ability to spend. With economic stimulus checks long gone, September bore witness to one of the most economically-tumultuous months in decades.

In early September, the government took over mortgage giants Fannie Mae and Freddie Mac. The Treasury Department announced its plans for a $700 billion rescue plan. The Fed, Treasury, and the FDIC stepped in to bolster the aid and takeover of many large financial institutions.

Beyond that, jobs were scarce and borrowing was few and far between. September’s decline in retail sales, considering the circumstances, doesn’t strike us as all too surprising. On the other hand, October has already been the host of numerous unprecedented Federal and Treasury actions, this time in response to September’s circumstances. Don’t count on retail sales improving through October, let alone through the holiday season and the end of the year. Consumers are stretched thin, and that’s no surprise.

On the bright side, many retailers large and small will be forced to offer sales, specials, and other deals to bring in customers.

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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