US retail spending falls, but lower car sales are to blame

Retail sales in the United States recorded their biggest monthly drop for four years in August. Sales were down 2.1% last month compared with August last year. However, most of the fall was due to Americans buying fewer cars and sales excluding vehicles actually increased by a stronger-than-expected 1%.

The latest figures also show that US industrial output growth was held back sharply by Hurricane Katrina, which struck at the end of the month. Industrial output increased by just 0.1%. Production at factories rose, while output by utilities and mining companies fell. The main problem was that Hurricane Katrina severely cut production of petroleum and chemicals along the Gulf Coast. Economists believe Katrina’s effects could reduce US economic growth by as much as 1% in the second half of the year.

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