Surging petrol prices and the slide in the American property market kept shoppers out of US malls in June, triggering a far worse than expected fall in retail sales.

Retail sales fell by 0.9 per cent last month, representing the sharpest fall in almost two years.

Demand for cars, furniture and building supplies fell as consumers eyed the sliding price of property and struggled to keep pace with higher mortgage payments.

Car manufacturers saw sales fall 2.9 per cent as the rising cost of fuel hit demand for gas-guzzling sports utility vehicles.

The figures also brought into question the stock market rally on Wall Street on Thursday, suggesting that investors may have been overenthusiastic about better than expected results from Wal-Mart, the retailer.

Jan Hutzius, chief economist at Goldman Sachs, the US investment bank, said that the poor retail figures raised pressure on the Federal Reserve to cut interest rates.

The price of fuel hit $3 a gallon this week – just as US petrol consumption surges to meet rising demand from American holidaymakers.

Oil prices are not expected to soften in the short or medium term, after the US Energy Department said this week that Americans were buying record amounts of petrol, up 1.4 per cent during the past four weeks compared with the same period the year before.

At the same time, the International Energy Authority said that global oil supply would not keep pace with demand during the next five years. Ian Shepherdson, of High Frequency Economics, predicted that the price of fuel would continue to depress consumer spending in the coming months. Shoppers have also been hit by the rising cost of mortgage repayments. In the two-year period to August 2006, the Fed raised its base rate 17 times, increasing the cost of borrowing from 1 per cent to 5.25 per cent.

On Wall Street, the Dow Jones industrial average closed 45.60 points higher at 13,907.30.

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