Car sales fall hits US spending

Consumer spending in the US fell by 0.1% in July compared with June, driven down by a large drop in car sales.

Vehicle and parts sales fell 2.4%, their biggest monthly drop since April and down 10.5% on July 2007.

Rising food and fuel prices are squeezing consumer spending and cutting demand for expensive items such as cars, whose running costs have risen.

However, according to the government estimates, retail sales were still 2.6% higher than in July 2007.

Economists said there were signs that tax rebates had encouraged some additional spending.

"In July we saw a rebound in furniture sales and electronics after a drop in June. So the tax rebates may have helped a little, but not every aspect of consumer spending," said senior economist Gary Thayer, from Wachovia Securities.

The US government sent tax rebate checks for $168bn to most US taxpayers during the month of July to help stimulate the economy.

Mixed picture

The data showed a mixed picture across the retail sector.

Furniture stores, which have suffered from a slowdown in the housing market, rose by 1 percent in July after a 1.2% decline in June.

Department stores enjoyed a 0.3% rise in sales in July, but restaurants and bars suffered a 0.2% fall in sales.

Elsewhere, department store chain Macy's said its same-store sales fell 2.1% in the three-month period to 2 August.

Its chairman Terry J. Lundgren, said the company "delivered strong second quarter earnings and cash flow, despite the poor economic environment".

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