Retail Sales in January Worst in Almost 40 Years

This is disastrous news. Something needs to be done now before it's too late:

Consumer spending slowed to a crawl in January, with retail sales at major chains rising just 0.5% in what was by one measure the month's worst performance in nearly 40 years, according to reports released Thursday.

Evidence of consumer caution came from both ends of the marketplace.

Discounter Wal-Mart Stores Inc. said shoppers held on tight to the gift cards they received over the holidays or used them to buy milk and bread rather than toys or iPods. High-end Saks Inc. said customers shifted more of their spending to "promotional events" -- making purchases when items were specially priced.

Wal-Mart's sales were higher this January than last, though just barely, while Saks saw a 4.1% increase. Sales at Macy's Inc. stores fell so much more than expected -- by 7.1% -- that the company slashed its quarterly profit forecast and also said that as part of a restructuring plan it would eliminate 2,300 jobs. Costco Wholesale Corp., on the other hand, recorded a 7% hike.

There were widely divergent numbers for individual chains but disappointment for the industry as a whole.

The International Council of Shopping Centers, which tallied 43 retail chains, said sales at stores open for at least one year were the worst since it started keeping track in 1969.

The reason for the terrible retail sales is consumer confidence:

People's confidence in the economy sank even lower amid heightened fears about shrinking job opportunities and the possibility the country is falling into recession.

According to the RBC Cash Index, confidence dropped to a mark of 48.5 in early February, from 56.3 last month. The new reading was the worst since the index began in 2002 and surpassed the previous low reached in January.

The continued erosion in confidence comes despite the fact that Federal Reserve Chairman Ben Bernanke has gotten much more forceful in cutting interest rates to induce people to buy more and bolster the economy. The Fed slashed interest rates twice over the span of just eight days in January—its most aggressive rate reductions in two decades.

[...] Still, an increasing number of economists worry that the rescue efforts by the Fed and the politicians may not be enough to avert the first nationwide recession since 2001. Some economists believe the economy has already toppled into a recession.