US Retailers Gloomy After Weak Housing Market Dents Sales

Fears are mounting of a dismal Christmas for America's shopping malls after a slew of poor trading updates from leading retailers including Wal-Mart, the clothes chain Gap and the discount store Target.

Wal-Mart, the world's biggest retailer, told Wall Street yesterday that its like-for-like sales rose by a modest 0.3% last month and that it expected its November figures to be "approximately flat". It intends to cut the price of toys and electronics to stimulate festive sales.

Its downbeat tone was replicated by many of its rivals, fuelling concerns that consumers are feeling the pinch from a rapidly weakening housing market.

Richard Iley, senior US economist at BNP Paribas in New York, said: "This is an economy slowing down rapidly as the housing market loses pace." He said there could be some "short-term tailwinds" from falling petrol prices but further ahead, the outlook was dark: "The tectonic plates of the economy are shifting and that spells very gloomy news for the American consumer."

The data firm Thomson Financial said that of 50 American retailers reporting October data, 28 have missed expectations and only 22 have beaten forecasts.

The struggling clothes chain Gap was among the poorest performers with a 7% fall in like-for-like takings despite efforts to revive its fortunes with a back-to-basics autumn collection. Target had a 3.9% rise but missed estimates of a 4.2% increase. Chico's, a specialist in clothes for older women, reported a 4.1% fall in same-store sales, prompting a 10% drop in its shares.

There was better news at the top end of the market with solid sales rises for the department store firm Nordstrom, the designer boutique owner Saks and the trendy teenage specialist Aéropostale.

Adrianne Shapira, a retail analyst at Goldman Sachs, said there were signs of a "considerable disparity between high-end and low-end consumers" but added: "People will be pushing some panic buttons if this softness continues."

Growth in the US economy has plummeted in the third quarter to its slowest for more than three years, sparking speculation among analysts that the Federal Reserve may cut interest rates before too long. The economy grew at an annualised rate of only 1.6% in the third quarter, down from 2.6% in the previous three months. This was the weakest rate since the first quarter of 2003, when growth was 1.2%. Recent data showed that new housebuilding fell 17.4% over the same period - the biggest drop for 15 years.

Julian Jessop, of Capital Economics, said he saw a 30% chance of a recession. "While too much should not be read into individual reports, the retail news today fits in with other elements of the economy, such as consumer confidence, which has been disappointing," he said. "Considering oil prices have fallen and the strength of the stock market, confidence should be very strong but the fact it is not suggests there's something else going on."