It was the sixth straight month of falling retail sales amid tight credit, rising unemployment and growing economic worries and confirmed the crucial year-end holiday shopping season was a bust.

'Consumers found that December was a good time to take a holiday from shopping,' said Joel Naroff of Naroff Economic Advisors.

Although retailers and other industry watchers had reported a painfully tough sales season, despite sharply discounted prices, the Commerce Department's December sales figure dwarfed most analysts' projections of a drop of 1.2 per cent in retail and food services sales.

'This is a bad report, though the extent of the weakness is unclear. The data are not adjusted for price changes and we know there was an awful lot of discounting going on in December,' Mr Naroff said.

The government's seasonally adjusted retail sales data are considered an important indicator of the direction of the US economy, where consumer spending accounts for two-thirds of economic activity.

President-elect Barack Obama has pledged a massive fiscal stimulus package once he takes office on January 20 to try to revive economic growth after more than a year of recession.

'A new administration is coming and Congress is likely to do something about a fiscal stimulus program within a month. ... Words are nice but we need action and soon,' Mr Naroff said.

Excluding gasoline sales, which plummeted amid falling crude oil prices, retail sales fell for the seventh consecutive month in December, by 1.4 per cent, compared with a slight 0.2 per cent decline in November, the department said.

Excluding auto sales, December retail sales fell a massive 3.1 per cent from November, when they fell 2.5 per cent. It was the steepest monthly drop in ex-auto sales since the department began tracking the data in January 1992.

The Commerce Department also sharply revised downward its previous estimates for total retail and food services sales for October and November, putting the declines at 3.4 per cent and 2.1 per cent, respectively.

The December retail sales plunge affected all sectors except health and personal care stores.

On an annual basis, December sales were down 9.8 per cent from December 2007.

Gasoline sales led the December decline, plunging a breath-taking 15.9 per cent from the prior month, and were down 35.5 per cent from a year ago.

The second-largest drop was in the building material and garden equipment sector, down 2.9 per cent, followed by clothing stores, down 2.5 per cent.

For the full-year 2008, retail sales were flat, down 0.1 per cent from 2007, when they had climbed 4.1 per cent on an annual basis. -- AFP