Shoppers staying away in droves

WASHINGTON — After the worst holiday season in 40 years, retailers face more sales declines in the months ahead as the recession deepens, job losses mount and consumers retrench further.

Retail sales plunged 2.7 percent in December, a record sixth straight monthly fall, and the first annual drop on government records dating to 1992, the Commerce Department said Wednesday. Last month's weakness — more than double what economists had expected — has extended into the new year with bankruptcy filings, store closings and more layoffs.

"Consumers are in deep hibernation, and there is no sign that they will wake up this spring or that the retail outlook will pick up anytime soon," said C. Britt Beemer, chairman of America's Research Group, a consumer research firm in Charleston, S.C.

This week alone, department store chain Gottschalks Inc. put itself up for sale and said it had filed to reorganize in a Chapter 11 bankruptcy, discount clothing chain Goody's Family Clothing filed for Chapter 11 protection, luxury retailer Tiffany & Co. lowered its year-end profit forecast and Neiman Marcus Group Inc. said it was cutting about 375 jobs. Last week, Macy's Inc. said it will close 11 underperforming stores in nine states, affecting 960 employees.

"I think there will be a pickup in bankruptcies" this year, said Ken Perkins, president of research company RetailMetrics LLC. "The whole department store and specialty apparel sectors have been very weak now for some time."

The Federal Reserve's latest survey of business conditions nationwide, released Wednesday, underscored that pain. Most retailers reported "generally negative" holiday sales and are cautious about sales prospects in the months ahead, according to the report based on information collected between late November and Jan. 5.

The Fed report also found economic activity declined in a range of manufacturing industries along with worsening troubles in the housing sector.

The bleak report on retail sales helped send stock prices down. The Dow Jones industrials lost nearly 250 points, or over 2.9 percent, and the other major indexes fell about 3 percent.

The weakness in consumer spending, which accounts for about two-thirds of total economic activity, has been a prime contributing factor to the economy's current swoon. Analysts said the worse-than-expected retail sales report

in December reinforced their belief that the current recession, already the longest in a quarter-century, will last at least until the second half of this year. The downturn began in December 2007.