Sep 14, 2007

American consumers are cutting backBy Parija B. KavilanzCNNMoney.com

New York — After months of speculation about how long American consumers can stay resilient to housing and credit woes, economists said Friday that last month’s retail sales weakness shows households are rethinking their spending habits.

The Commerce Department reported that total retail sales last month rose 0.3 percent, short of economists’ forecasts of a 0.5 percent rise. Stripping out volatile auto sales, retail sales actually fell 0.4 percent versus forecasts of a 0.2 percent increase.

The numbers fueled worries that American consumers are feeling the pressure of an ongoing slump in the housing market, mortgage turmoil and also higher energy costs.

“This [August report] is not a disaster but it was unexpected. What matters now is the extent of any fall rebound,” Ian Shepherdson, chief U.S. Economist with High Frequency Economics, wrote in a report Friday. “We expect a clearly slowing trend. Lower confidence and the accelerating housing collapse will hurt.”

Compounding that concern, a new survey of American consumers from RBC Capital Markets on Friday said subprime worries, softening job markets, rising gas prices and an unstable stock market have taken a toll on consumer sentiment.

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