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Last Updated: Friday, 13 July 2007, 13:30 GMT 14:30 UK
US retail sales fall unexpectedly
Shoppers in New York
Problems in the housing market are hitting retail sales
US retail sales unexpectedly dropped by 0.9% in June, a report from the US Commerce Department says - their biggest decline in almost two years.

Sales were down 0.4% even without the effect of a slump in the car market, the cause of much of the fall.

The month before, retail sales had risen by a revised figure of 1.5%.

The problems in the housing market were reflected by a 3% fall in furniture sales and a 2.3% fall in sales of building materials and garden supplies.

The figures are likely to add to fears about the prospects for the US economy, currently assailed by the problems with sub-prime mortgages and the risk of a knock-on effect on investment and lending.

If retail sales stay weak, that could impact economic growth, since consumer spending accounts for two thirds of economic activity.

Figures out on Thursday had led economists to expect better retail sales figures.

The world's biggest retailer Wal-Mart reported better-than-expected 2.4% growth in June sales at US stores open for at least a year.

The International Council of Shopping Centers said US chain store sales had also grown 2.4% in June.

Christopher Low, chief economist at FTN Financial in June, warned against setting too much store by monthly figures, preferring the quarterly numbers.

"There was absolutely gangbusters growth in the first quarter," he said.

"The sales pace in the second is moderately strong, certainly not weak," he added.

A poll by Reuters had predicted that retail sales would rise 0.2% in June.

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