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Markets in London and New York plunged today after American retail sales fell twice as much in December as forecast.
Trade over the Christmas and sales season fell 2.7 per cent, far above the 1.2 per cent expected by analysts and, excluding car purchases, dived 3.1 per cent, the worst fall since records began in 1992.
In London, the FTSE 100 index of leading UK companies fell 256.93 points to 4,142.22 and, in New York, the Dow Jones industrial average fell 263.87 points to 8,184.69.
Tightening credit conditions and rising unemployment contributed to a slowdown in spending by US consumers last month.
America has been stunned by the loss of 2.6 million jobs over the past 12 months, sending unemployment in December to 7.2 per cent, the highest level in almost 16 years.
Almost all large retailers have trimmed their full-year and fourth-quarter forecasts after a dire festive sales period despite record-breaking discounting.
Eleven of the 13 major product categories monitored by the Government fell in December, with most down by at least 1 per cent.
Only health and beauty retailers and the miscellaneous category reported a rise in sales last month.
Much of overall drop in figures last month was due to plummeting petrol prices, which pushed down fuel sales by 15.9 per cent.
The International Council of Shopping Centers said last week that the final two months of 2008 had been the worst shopping season in almost 40 years, with same-store sales down 2.2 per cent.
Ian Shepherdson, chief US economist for High Frequency Economics, said that today's figures confirmed that the festive sales period had been truly disastrous.
"Surely, Q1 can't be as bad," he said.
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Ahh! The benefits of globalisation!!!
Jim Thornton, London,
The Government has not got a clue! They are slow to react to everything and live in the past. Whilst the economy was steadily shrinking all they thought about was re-election! Now it will take at least 5 years for economic stability to return, the Euro has also added another unwanted dimension too
P R Gunnell, Ipswich, UK
Here we go into the depths of the abyss.Contagion has now spread which is being followed by demand destruction as your editorial confirms.This in turn will be followed by debt destruction and then deflation. the tories are still harping on about thrift & a govt minister says she can see green shoots
john w, Birmingham, UK
I walk into a BMW and Audi dealership ready to buy a car in cash. I say I want a big discount. They say, they will give me £2K off a £30K car and cannot go any lower as the manufacturers wont let them. No wonder nothing is selling. Price products correctly. Reduce prices significantly.
Bob, London,
As the majority of spending is on goods imported from China, falls in retail sales help to redress the balance of payments deficit, wihch in the long run is *good* news for the USA.
Paul, Coventry,
Oil price today at 36 dollars.When are the Utility Companies going to be ordered to lower their prices.Its a RIP OFF and the privatisation promise by Thatcher that it would bring lower prices due to competion was a con.Lower prices would give the public more money to spend helping the economy.
Bill Rees, Falmouth, Uk
Unfortunately Q1 can be as bad and part of a more substantial trend, too much of GDP in the US and UK is centered on retail sales. Retail sales which are retrenching as people begin to conserve cash and think about what they actually spend money on.
M Blackwell, London,
It really is so simple, why can people not see the reason? Our society has increasingly become dependent on debt, to the extent that our nation is bankrupt and our currency will soon be worthless - encouraged by politicians. 1929 seen the Dow collapse to 1/10 of its value over a period of 3 years.
R McAuley, Antrim, United Kingdom
Spending in the UK being governed by taxation, high domestic fuel bills and the high cost of food. As examples - the government introduces new, high car-tax, keeps perol tax high, high council tax, we - the public ajust how we spend - less, because, tax we cannot escape. The golen goose is dying
A. Anderson, Liverpool, England
How can fuel price falls be touted as reason for the declining sales figures. surely it is soaring fuel prices that would be the killer to sales figures
rich, denia,
Doesn't the UK short selling embargo get lifted this week?
Has there been a lot of shorting ahead of the relaxation?
What does the FSA have to say, if anything, on this dramatic change of sentiment?
A.Williams, Cradley Heath,