US retail sales drop sharply in August

US retail sales dropped by a larger-than-expected 2

US retail sales dropped by a larger-than-expected 2.1 per cent in August, the sharpest drop in almost four years, after car purchases collapsed from July's near-record level, government data showed today.

Sales excluding autos were buoyed by high gasoline prices, however, climbing a stronger-than-expected 1 per cent. The US Commerce Department said it could not quantify the impact of Hurricane Katrina but said it would have been small because the storm-affected region accounted for little more than 1 per cent of total national sales.

"Moreover, the effect of the hurricane on the national retail sales estimates in August would be much less, since the hurricane only impacted the last few days of August," the department said in a statement, noting that it had to estimate some of the results for August because some firms had problems in reporting.

Wall Street analysts forecast retail sales to decline 1.2 per cent following July's 1.8 per cent gain. But sales were held back by a record 12 per cent drop in motor vehicle and parts sales, despite continued heavy discounting by dealers.

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Retail sales outside of the auto sector rose 1.0 per cent, compared with expectations for a 0.5 per cent advance, after a revised 0.5 per cent gain in July.

Analysts fear high energy prices could sap consumer spending, on top of any negative fallout from Katrina, although the economic evidence so far has been mixed.

On Friday, Wal-Mart reported strong demand for hurricane-related merchandise.

It repeated its September forecast of 2 per cent to 4 per cent sales growth, but warned this was subject to revision because of oil prices and the hurricane.

Furniture sales delivered a solid 0.9 per cent advance in August while building materials and garden equipment grew by 0.5 per cent. The US housing market has been rampant thanks to low borrowing costs, buoying prices and breaking records for new home sales.