US retailers saw a record drop in sales in October of -2.8% led by a huge fall in auto sales, according to the Commerce Department, as tighter credit and the faltering economy forced consumers to cut back on their spending.

The weakness was led by a -5.5% fall in auto sales, with carmakers reporting unit sales falling to its weakest level in 17 years. The report showed that sales at general merchandise stores fell -0.4%, while sales at specialty clothing stores were down -1.4%, and sales at furniture stores also dropped by -2.5%.

Consumer spending accounts for two-thirds of total economic activity. The gross domestic product (GDP) fell -0.3% at an annual rate during Q3, the strongest signal yet that the country has fallen into a recession. Many economists believe the GDP will drop by an even bigger amount in the current October-December period and will continue falling through the first two quarters of next year, sparking the worst recession since the 1981-1982 downturn.

The Government recently said that the unemployment rate shot up to 6.5% in October, and many economists believe it will top 8% before the economy starts to mount a sustained rebound.