Cash for clunkers boosts US sales

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US retail sales rose sharply in August, boosted by the "cash for clunkers" scheme that offered motorists incentives to buy new cars.

Sales rose by 2.7% from the previous month, following the surprise fall in sales in July, the official figures from the Commerce Department showed.

But compared with the same month last year, sales fell by 5.3%.

Separate figures showed that US producer prices rose by 1.7% in August, much more than analysts had expected.

The main reason for increase was a 23% surge in petrol prices, their biggest monthly gain in more than 10 years, the Labor Department figures showed.

'Recovery'

Vehicle sales rose by more than 10% from July, while food, electronics and clothes sales also all increased.

Total sales for August stood at $351.4bn (£213.3bn).

The better-than-expected figures were largely due to the "cash for clunkers" scheme that ended at the end of August after the $3bn set aside for it ran out.

The V-shaped recovery just got a badly needed shot in the arm today as the consumer is back in the game in a big way Chris Rupkey, Bank of Tokyo/Mitsubishi UFJ

There are concerns that sales could now fall away again.

"The retail sales obviously was inflated by the cash for clunkers, and the autos rise is going to be reversed," said David Sloan at 4Cast.

But even without cars, sales increased by 1.1%, encouraging some analysts that believe that the US economy is recovering from the recession.

"The V-shaped recovery just got a badly needed shot in the arm today as the consumer is back in the game in a big way," said Chris Rupkey at Bank of Tokyo/Mitsubishi UFJ.

Retail sales figures are seen as a key indicator of the health of the US economy as consumer spending accounts for more than two-thirds of all US economic activity.