Poor weather hits US shoppers

US shoppers were deterred by bad weather last month

US retail sales fell in August as rising energy prices and poor weather kept more shoppers at home.

Sales fell 0.3% last month, according to the US Commerce Department, with car, clothing and furniture retailers all feeling the pinch.

The decline in sales, the third fall in the past five months, was steeper than expected, but analysts said underlying consumer spending remained robust.

Separate data showed the US suffered a record trade gap in the second quarter.

The US current account deficit widened to $166.18bn in the second quarter, outpacing economists expectations of a $159.35bn gap.

Economists have questioned how long the deficit, the broadest measure of the levels of trade and capital moving in and out of a country, can be sustained.

Car crunch

Retail sales have performed erratically in recent months, rising 0.8% in July following a 0.7% decline in June.

Analysts had forecast a 0.1% fall in August.

However, economists said they were not unduly worried by the drop.

They pointed to the fact that excluding sales of cars, total retail activity actually increased 0.2%.

Sales of cars and parts were down 1.9%.

Clothing and furniture sales dipped while department stores, bars and restaurants reported weaker trade.

However, sales of electronic goods, appliances, books, music and health & beauty products all rose as did petrol sales.

Overall sales are still very strong but not as strong as they have been David Wyss, Standard & Poor's

Analysts said that rising petrol prices had restricted consumer spending in other areas while bad weather in many parts of the country had also discouraged shoppers.

Solid growth

"The core of retail activity, excluding autos, looks pretty encouraging," said David Resler, chief economist at Nomura Securities.

"With inflation outside the energy sector being muted, I think these translate into solid growth in retail spending," he added.

"When you take out cars, it is not all that slow," said David Wyss, chief economist at Standard & Poor's Ratings Services.

"Overall sales are still very strong but not as strong as they have been."

The current account deficit was the equivalent of 5.7% of US gross domestic product in the second quarter.

Economists have argued that the deficit must eventually be pegged back either by a sharp reduction in consumer spending or a significant change in the value of the US dollar.

"In the very short run, foreign central banks are likely to continue to sustain the dollar," said Marie-Pierre Ripert, an economist with CDC IXIS.

"But obviously the sustainability of the rising current account deficit is questionable."