Purchases of vehicles plunged in July, sending US retail sales down sharply, as American shoppers pulled back on buying an array of goods, the government reported Tuesday.

Restaurants and bars continued to see an upswing in business as customers ventured out despite increasing cases of the Delta variant of Covid-19, and rising prices at gasoline stations also boosted sales there, the data showed.

Total sales fell a surprising 1.1 percent compared to June, a far bigger drop than analysts were expecting, as auto sales collapsed 4.3 percent, the Commerce Department reported.

Excluding all motor vehicles and parts, total retail sales fell just 0.4 percent, but sales are still 15.8 percent higher than July 2020, the report said.

Auto sales plunged in July though Americans spent more at bars and restaurants, government data said
Auto sales plunged in July though Americans spent more at bars and restaurants, government data said GETTY / JUSTIN SULLIVAN

New restrictions in some areas, including a resumption of mask requirements, could be a factor in the declines, along with the tapering of government stimulus checks, which fueled a spending boost in recent months.

Other big declines were posted in clothing and sporting goods along with building materials, where rising prices and supply bottlenecks have hampered construction.

Online sales retreated once again, falling 3.1 percent, while miscellaneous brick and mortar retailers moved in the other direction, gaining 3.5 percent in the month, the report said.

"It's impossible to separate the impact of the fading stimulus boost from the possible hit due to the Delta variant," Ian Shepherdson of Pantheon Macroeconomics said in an analysis.

But he warned, "The Delta hit likely will be bigger in August, so we have to scale back our hopes for third-quarter consumption quite sharply."

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