A sale sign hangs on a window at the Virgin Megastore in New York’s Times Square, December 26, 2008.

Cutbacks on clothing, electronics and jewelry led US retail sales to drop as much as 4 percent this holiday season as consumers limited purchases to necessities, according to SpendingPulse data.

“Overall this has been one of the most challenging holiday seasons on record,” McNamara said.

Consumers, facing a recession, tightening credit and the highest unemployment rate in 15 years, shortened their gift lists and spent less. Retailers including Macy’s Inc. and AnnTaylor Stores Corp. responded by increasing markdowns, which stand to hurt profit margins in what may be the weakest holiday spending season in four decades.

The SpendingPulse figures follow forecasts of falling sales from industry groups. Sales at stores open at least a year may drop as much as 2 percent in November and December, the International Council of Shopping Centers said on December 23, more than the previously projected 1 percent decline.

‘Black Friday’

The drop puts pressure on retailers to attract shoppers to their after-Christmas sales, which started Friday.

“The Friday after Christmas, with the discounts we’re hearing about, is going to be like another Black Friday,” said Scott Krugman, a spokesman for the National Retail Federation, a Washington-based trade group. “The week after Christmas is going to be more crucial for retailers than ever.”

The Standard & Poor’s 500 Retailing Index has shed 34 percent this year, with only two of its 27 companies gaining.

From November 1 to December 24, women’s clothing sales dropped 23 percent and men’s fell 14 percent, according to SpendingPulse.

Combined electronics and appliance sales tumbled 27 percent, with purchases of over $1,000 suffering the most, according to SpendingPulse data. Luxury sales, including jewelry, plunged 35 percent, the data showed.

Purchases over the internet fared better, with a 2.3 percent decline. E-commerce may have been helped by inclement weather at the end of the holiday shopping season, McNamara said. Historically web sales have posted 15 percent to 20 percent yearover-year sales gains.

The US economy shrank in the third quarter at a 0.5 percent annual pace, the worst since 2001, according to the Commerce Department. Consumer spending fell the most in almost three decades and forecasters project an even deeper slump in the final three months of this year.

Source: Bloomberg