The initial rush investors got from the nation’s return to economic growth faded quickly Friday when the Commerce Department reported a decline in consumer spending for September, pushing retail stocks down 2.7 percent — the steepest drop since Aug. 17.

This story first appeared in the November 2, 2009 issue of WWD. Subscribe Today.

Personal consumption expenditures fell 0.5 percent last month, compared with the prior month when the “cash for clunkers” program boosted spending. Expenditures rose 1.4 percent in August, 0.2 percent in July and 0.7 percent in June.

Government stimulus, such as the auto incentive program, fueled 3.5 percent growth in the nation’s third-quarter gross domestic product, ending a year of declines and lifting stocks on Thursday.

A day later markets gave back all of their GDP-driven gains, with the S&P Retail Index falling 10.67 points to 380.39. The sector declined 3.7 percent for the last week but ended the month with a 0.8 percent gain. The Dow Jones Industrial Average dropped 2.7 percent, or 249.85 points, to 9,712.73 on Friday, pushing the week to a 2.6 percent decline and effectively erasing all the month’s gains.

But some analysts see a holiday silver lining for companies that have found fiscal austerity, cut inventories and prepared to replenish quickly if needed.

“Lack of product availability could entice shoppers to buy early, pushing sales into October-November at the expense of December,” said Citi broadlines analyst Deborah Weinswig in a report. “Retailers with innovative replenishment processes, such as [Target Corp.] domestically sourcing apparel and [Macy’s Inc.] using air freight, will be best positioned to chase sales.”

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