"I find is so depressing to be in a great big, empty store. There's nobody to give me confidence," said shopper Donna Browne.
Browne and a friend went shopping at Macy's in downtown Chicago Wednesday, but they're part of a dwindling crowd. Retail sales plunged in September by the largest amount in three years. The 1.2 percent decrease was bigger than expected, and experts say consumers are changing their spending habits to cope with the economic crisis.
"People are going to buy low. They're going to be buying their goods at Wal-Mart. They're not going to be buying high end," said Homer Johnson, Loyola University professor.
At the Target on West Peterson in Chicago has seen consistent crowds but says the stores are still aggressively marketing toward their consumers. Currently, they're offering sales that would typically not be available until the day after Thanksgiving.
"We still have been keeping up to pace, and we still have been fairly busy. But you can see the shopping trends have changed. The guests are coming in and they're buying commodities and they're buying food," said Darius Pfiefer.
Johnson says he sees the decline in retail sales for higher end stores and luxury goods continue for the next couple of months.
"Christmas is going to be bad, particularly with the high end stores and particularly with the items like jewelry, electronics, that you typically buy for Christmas and only for Christmas," Johnson said.
Johnson says it may take two to three years to see overall improvement in the economy.
The Commerce Department reported Wednesday retail sales decreased 1.2 percent last month, nearly double the 0.7 percent drop that had been expected. It was the biggest decline since retail sales fell by 1.4 percent in August 2005.
The bigger-than-expected decline significantly increased the risks of a recession because consumer spending is two-thirds of total economic activity.
The weakness was led by a 3.8 percent drop in auto sales. Sales dropped below 1 million units as consumers struggled to find financing.
Retail sales have now fallen for three consecutive months, the first time that has occurred on government records that go back to 1992. Economists had expected sales to be down in September as a flood of bad news about the financial system and rising unemployment increased consumers' worries.
Many analysts believe the overall economy, as measured by the gross domestic product, is slipping into a recession, triggered by a steep slump in housing and the severe credit crisis.
Even excluding auto sales, retail sales showed widespread weakness, falling by 0.6 percent or double the decline outside of autos that had been expected.
Sales at department stores fell by 1.5 percent following an even bigger 1.6 percent drop in July. Sales at furniture stores fell by 2.3 percent. Sales at appliance stores slid 1.5 percent.
In other economic news, the Labor Department reported that wholesale prices fell for a second straight month, declining by 0.4 percent, thanks to a big drop in energy costs. However, core wholesale prices, which exclude food and energy, rose by 0.4 percent, double what economists had been expecting.
Federal Reserve policymakers are counting on the economic slowdown to dampen inflation pressures and give them more room to cut interest rates if needed to keep the financial crisis from pushing the country into a deep downturn. The central bank last week cut a key rate by a half-point at an emergency meeting, coordinating the move with other major economies.
The Associated Press contributed to this report.
