Bermuda does not need any more bad news on the economic front, but that does not mean it will stop.Yesterday saw the release of the retail sales figures for July, which proved what was fairly obvious anyway that the recession is deepening and recovery may be some time off. The overall headline was very poor as sales fell by five percent. In real terms, once inflation is taken into account, the drop was more severe with sales falling by 8.5 percent.To be sure, much of this decline was caused by a shocking 40 percent slump in car sales. It is worth noting that sales in July were fully 60 percent lower than the average monthly sale in 2006, a figure which, if it continues, is unsustainable. That decline was partly offset by an 8.8 percent rise in sales at gas stations, but that is almost entirely due to the soaring cost of fuel, so the reality is that that is money that will go straight out of the Island.Elsewhere, there were some glimmers of hope. Apparel sales rose due to the slight improvement in tourism this year. Sales of building materials rose, apparently as a result of the building projects at the hospital and on Pitts Bay Road, but they remain well below their highs of 2009. What should be worrying is that food sales dropped for at least the second straight month, having held up quite strongly previously, although rising prices will have contributed to that. But the drop suggests and two months does not make a definite trend that the Island’s reduced population and reduced incomes are really starting to bite.So what can be done? As ever, the major problem is confidence. As long as people are uncertain about the future, they will reduced spending, which contracts the economy. The job schemes finally being launched by Government will help. But Bermuda remains expensive and uncompetitive, and until that changes, the economy will continue to shrink.Government needs to look seriously at ways of reducing Customs duty on imports and payroll. Only by reducing costs and encouraging visitors and residents to spend more and employers to hire will the economy begin to recover.The problem with this, of course, is that in the short term it will reduce Government revenues, and therefore increase debt further, unless public spending is reduced. If the economy recovers, then the declines in revenue should be made up in the medium term, but there will be a lag in this. One solution is to further cut Government spending, but this is a double-edged sword. Reducing employment now will hurt the economy further, and politically Premier Paula Cox will be loath to alienate public servants, many of whom are likely PLP voters.But Government’s wasteful offices in London and Washington could be closed, and the overseas consultants still on Government’s payroll could be cut as well. None of this can be done without risk. But what is certain is that the current economic plan, such as it is, is not working.