Retail spending climbed when the effect of falling car sales was ignored

US retail sales fell in September by the largest amount in 2009, driven by car sales plummeting at the end of the country's scrappage scheme.

The Commerce Department said sales slid 1.5%, not as bad as expected, but the biggest drop since December last year.

Car sales dropped by 10.4% but when vehicles were stripped out, retail sales actually rose by 0.5%, better than the 0.2% which had been forecast.

Consumer spending makes up more than two thirds of US economic activity.

A late Labor Day holiday helped retailers last month because consumers purchased some items in September that they would normally have bought in August, analysts said.

'Expected'

The 1.5% drop in September's retail sales followed a 2.2% rise in August, which was revised down from an earlier estimate of 2.7%.

That came as demand for new cars surged in August as buyers took advantage of the final month of the government's incentives of up to $4,500 to trade in old models for more fuel-efficient cars.

The Commerce Department figures showed that sales in furniture stores jumped 1.4%, reflecting the rebound in the housing industry. Meanwhile, sales at general merchandise stores such as Wal-Mart and Target, rose 0.9%.

"Certainly the numbers were better than expected," said Scott Brown, chief economist at Raymond James Associates.

"You did see a big drop in vehicle sales as cash for clunkers expired, which was in line with expectations."