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US sales drop as car fever wanes

Figures this afternoon showed that a slump in car sales drove US retail sales down 2.1% in August from July.

But the Commerce Department said that excluding cars, sales overall rose 1% on the month, with half of the increase due to higher sales of petrol on the back of sky-high pump prices. Analysts were expecting the headline figure to fall 1.4% and the figure excluding cars to go up 0.5%.

US car makers spent much of the summer offering furious discounts on their models, but those gains were reversed last month as the price war lost appeal for consumers.

The figures reflected retail sales before Hurricane Katrina slammed into the Gulf Coast on August 29. The worst-hit conurbations including New Orleans account for 1.2% of total US sales.

Separate figures from the US Federal Reserve showed that US industrial production rose a modest 0.1% in August, despite a hit to several industries from Hurricane Katrina. Analysts had expected the report, measuring the output of US factories, mines and utilities, to show a 0.3% increase.

But the Fed said Katrina's devastation on the Gulf Coast took away about 0.3 percentage points from output, mainly in the areas of oil and gas production and the refining and petrochemical industries.