Consumers cut back sharply on spending

WASHINGTON — Consumers, taking a beating from the worst financial crisis in seven decades, cut back sharply on their spending in October, pushing retail sales down by a record amount.

As President George W. Bush and other world leaders gathered for a weekend summit to search for ways out of the mess, Federal Reserve Chairman Ben Bernanke hinted at another interest rate cut. Bernanke said financial markets remain under "severe strain" in a speech to a central banking conference in Frankfurt, Germany. He pledged to continue working with other countries to deal with the crisis and left open the door to a fresh interest rate cut.

The Commerce Department reported Friday that retail sales fell by 2.8 percent last month, the biggest drop on record, surpassing the old mark of a 2.65 percent plunge in November 2001 that occurred after the terrorist attacks.

The October sales decline was led by a huge fall in auto purchases, but sales of all types of products suffered as consumers, worried about their jobs and the market turbulence, cut back sharply on spending.

It marked the fourth straight decrease, the longest stretch of weakness on record.

Retailers are braced for what could be the worst holiday shopping season in decades. A survey of the nation's big chain retail stores found that retailers suffered through the weakest October in at least 39 years even though they tried to gin up more sales by a frenzied round of price cutting.

Amid the dismal economic news, Bush is hosting a leaders' summit of the Group of 20, which includes not only the world's wealthiest nations but also major developing countries such as Russia, China, Brazil and India. The G-20 leaders are meeting in Washington for two days of talks that will wrap up Saturday. See story, Page A4.

Bush on Thursday defended his administration's response to the financial crisis, which has included massive amounts of government assistance to banks and outright government takeovers of the country's biggest mortgage finance companies.

"I'm a market-oriented guy, but not when I'm faced with the prospect of a global meltdown," Bush said in a speech in New York.

He put forward a list of modest reform proposals including making accounting rules more transparent but stopped well short of the global market regulator being sought by some European nations.