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Retail Sales Slump

WASHINGTON--U.S. retail sales fell by 2.1 percent in August, after a record fall in car sales and a sharp decrease in industrial output growth as a result of Hurricane Katrina, the U.S. Commerce Department reported.

Advance estimates of retail and food services sales for August totaled $350.1 billion, down 2.1 percent from July, but up 7.9 percent from August 2004, according to U.S Census Bureau data. Total sales from June through August were also up 9.4 percent from the same period last year.

The August slump -- the biggest slide since the months following Sept. 11, 2001 -- spared most small businesses, which continued to report solid growth, a National Federation of Independent Business (NFIB) study showed. The decline came despite gains in nearly ever sector outside motor vehicle and parts, including building supplies, health care products, clothing and accessories, sporting goods, furniture, electronics and appliances, and food and beverages.

Battling record-high fuel prices, automakers and car dealerships sold just 16.8 million cars and light trucks in August, after boosting sales by 6.3 percent to 20.9 million in the previous month. The boom in July is credited to employee discount deals offered by General Motors, Ford and Daimler Chrysler. Auto sales were also dampened by this summer's rising gas and oil prices, which spiked in the aftermath of Hurricane Katrina.

Meanwhile, the National Retail Federation reported that retail sales in August actually jumped 7.9 percent excluding auto, gas station and restaurant sales.

"Though gas prices are a concern, the August report is further proof that it is unwise to base retail sales projections on one economic indicator," said NRF Chief Economist Rosalind Wells. "Retailers who were anxious about the upcoming holiday season may be breathing a little easier."

The Commerce Department said that it expected Katrina's impact to be small, because the region affected accounts for only about 1 percent of national sales.

William Dunkelberg, an NFIB economist, said any interruption to a tight energy market and a prolonged shutdown of the New Orleans port could have a big, though temporary, affect on the economy. "That could dampen growth, no doubt," Dunkelberg said.

Still, NFIB data released Tuesday showed small businesses across every sector reporting solid sales last month, with owners remaining optimistic for the months ahead. Retail sales accounts for half of all consumer spending, which represents a full two-thirds of the economy.

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