20080623 lot full of suvs and trucks 18
SUVs and trucks sit on a lot waiting for buyers in Norwalk, Connecticut. Higher fuel prices have led to a steep decline in SUV sales across the country. - 


Scott Jagow: With prices so high, people have really reigned in their spending. The government says retail sales fell in July -- that's the first drop since February. Alisa Roth tells us there's one thing in particular people aren't buying.

Alisa Roth: Vehicles. Sales of cars and parts dropped almost 2.5 percent last month.

Joel Naroff is chief economist for Commerce Bank:

Joel Naroff: Well, clearly consumers are being cautious, but the biggest problem is that they're not buying motor vehicles at all.

Not surprising, since gas prices were still around record highs last month.

Naroff: And as a result of that consumer spending is soft, but it's not terrible, and that's what seemed to come out of July's retail sales numbers.

There were decent gains in both furniture and electronics. Of course, numbers like these are notoriously volatile. Because in June, nobody was buying furniture or appliances.

Naroff thinks things could pick up slightly in August, with back to school sales and college students buying electronic gadgets. Slow spending by consumers means tough times for retailers. Naroff says stores are keeping smaller inventories and offering big discounts on the stuff they do have.

In New York, I'm Alisa Roth for Marketplace.