WASHINGTON, Oct 13: Shaken US shoppers sent retail sales plunging 2.4 per cent in September, government figures showed on Friday, a sign that the economy has felt the effects of the terrorist onslaught.

The slump in sales was the the steepest since current records began February 1992, the Commerce Department said. It far exceeded Wall Street forecasts.

This is the scene we were fearing, said Eaton Vance bank’s economist Robert McIntosh.

The consumer, which really had been the one leg of the stool throughout this slowdown, may finally be just so worried they are not going to spend any more, he added.

Consumers were unwilling to spend in the uncertainty created September 11, when 19 terrorists took over fuel-ladden commercial flights and rammed into New York’s World Trade Center and the Pentagon.

I think that bodes poorly for the economy, said McIntosh.

The consumer is two-thirds of gross domestic product (GDP) and if consumption is really going down as much as it seems based on this one month, that is a pretty grim outlook.

The index of US consumer confidence edged up to 83.4 points in the preliminary October reading from 81.8 in September.

But Gerald Cohen, senior economist at Merrill Lynch, said consumer spending would likely show a decline in the months ahead.

We believe consumer spending will fall at over a one-per cent rate in the fourth quarter as layoffs and falling confidence take their toll, Cohen said.

In September, the latest data showed, clothing sales plunged 5.9 per cent, restaurant and bar sales fell 5.1 per cent, sales at auto dealerships slumped 4.6 per cent, and building material sales retreated 2.2 per cent.

It was a significant shutdown in spending that resulted from the terrorist attacks, said Naroff Economic Advisors chief economist and president Joel Naroff.

The outlook may not be so gloomy, however, once the initial impact wore off, he said.

Economists widely expect the US economy to shrink in the July-September period and many are tipping another decline in the final quarter of of this year.

Two consecutive quarters of contraction are the technical definition of recession.

The economy is generally expected to recover in 2002 due to heavy tax cuts and government spending.

The big question now hung over the current environment, Naroff said.

Many auto dealers were reversing a collapse in sales with zero per cent financing offers while retailers were reporting a significant bounce back from the immediate aftermath, he said.

While the retail data tell us how badly retailing was hit, they do not tell us anything about what is going to be the case going forward, and initial reports are that things may be better than was feared, he said.—AFP