HONG KONG, Sept 1, 2009 (AFP) - Hong Kong retail sales dropped 5.4 percent in volume year-on-year in July, the government said Tuesday 1 September, adding that the fall was in line with narrowing monthly declines as the economy rebounds.

Total retail sales in July were 22.8 billion Hong Kong dollars (2.92 billion US), the Census and Statistics Department said in a statement.

Although sales volume fell, declines in recent months have stabilised to between 4.0 and 7.0 percent, the government said, after sales slumped by much as 12.6 percent in February.

Transactions for motor vehicles and parts decreased the most year-on-year, by 30.7 percent. That was followed by sales of footwear and other clothing accessories, which dropped 9 percent.

However, the volume of fuel sales increased by 4.9 percent year-on-year while jewellery, watches and clocks, and valuable gifts posted a 2.5 percent improvement.

The government said the slower declines in recent months reflected an improved consumer sentiment.

"The recent rebound of the economy, the resilience of the labour market, and the government's relief measures should render some support to consumer confidence and hence the retail trade," he said.

However, the spokesman also sounded a note of caution as the recovery prospects for the global economy remained uncertain.