US consumers curb their spending

Sales at Wal-Mart and other big retailers fell sharply in April

US retailers stumbled in April as rising petrol prices took their toll, but inflation remained subdued, official figures indicate.

Retail sales fell 0.2%, tripping up economists, who had expected a positive number for the month.

The US Commerce Department figures came a day after Wal-Mart, which owns Asda in the UK, reported its biggest drop in sales since 1979.

Meanwhile, wholesale inflation rose 0.7%, hit by soaring fuel prices.

Petrol prices now stand at record highs of more than $3 a gallon, climbing by 8.2% in April, according to the US Labor Department.

The report also showed food prices up 0.4% - a moderate increase in comparison with March's 1.4% rise - while energy prices went up by 3.4%.

Fragile economy

April's 0.7% rise in the price of goods before they hit store shelves was in line with expectations and comes after a 1% increase in March.

Excluding volatile energy and food prices, all other prices were flat for a second month, calming fears that inflation pressures had spread to the wider economy and boosting hopes of an interest rate cut later in the year.

The US Federal Reserve kept interest rates on hold at 5.25% at this week's meeting, signalling it was more concerned about wage pressures than a slowdown in the economy.

Today's data reinforces the view that inflation is contained, while the economy is showing signs of a slowdown Alex Beuzelin, Ruesch International

But economists are concerned about the fragility of the economy, particularly as surging petrol prices and the sub-prime housing slump weigh on low and middle-income consumers.

New figures showing weaker-than-expected sales are likely to exacerbate these fears.

Sales at Wall-Mart stores open at least 12 months fell 3.5%, with the retailer blaming the slowing economy for keeping its core discount shoppers away.

"Bottom line, today's data reinforces the view that inflation is contained, while the economy is showing signs of a slowdown," said Alex Beuzelin, an analyst with Ruesch International in Washington.

"It also supports the view that the Fed will have to cut rates some time this year," he added.