US consumers fell out of love with cars in January, pulling down otherwise strong retail sales figures for the month.

American consumers are holding up not only the US economy but the global economy as well Bill Cheney, Economist

The Commerce Department said retail sales dropped 0.9% in January - after a revised increase of 2% in December.

Excluding the auto figures, sales showed a rise of 1.3%, the strongest gain since September 2000.

Sales by car dealers dropped 7.5%, the biggest fall since November 2001 after the 11 September attacks on the US.

Consumer spending accounts for about two-thirds of US economic activity and has been one of the few strong points in the economy.

"American consumers are holding up not only the US economy but the global economy as well," said Bill Cheney, chief economist at John Hancock Financial Services.

"Their spending will remain crucial because the conflict with Iraq and the broader geopolitical uncertainties are keeping businesses on the sideline."

DIY bonanza

On Tuesday, US Federal Reserve chairman Alan Greenspan said consumer spending had been a "major factor" underpinning the economy in the past two years.

But he warned that businesses were being extremely cautious in the face of the possible war on Iraq.

Consumers splashed out on building and gardening materials with a 2.9% rise in January, as well as food, drink, clothes and healthcare products.

Higher petrol (gasoline) prices pushed service station sales up 2.7%.

But furniture, electrical goods and department store sales all fell.

Compared with January 2002, overall retail sales were up 3.9%.