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UPDATE 1-Japan retail sales slow in July, still top expectations

(Adds breakdown of data)

* July retail sales +1.9 pct yr/yr vs f'cast +1.0 pct y/y

* Sales of clothes and cars slow in July

* Economists expect consumption to pick up in Q4

TOKYO, Aug 30 (Reuters) - Japan's retail sales growth slowed in July as shoppers spent less on clothes and cars, but economists remain optimistic that consumer spending will soon gather pace due to a tight labor market. Retail sales rose 1.9 percent in July from a year ago, which was more than the median estimate for a 1.0 percent annual increase but still slower than a revised 2.2 percent increase in the year to May. Separate data on Tuesday showed household spending unexpectedly fell in July, which has injected some caution into the debate about whether domestic demand can continue to drive growth. Nonetheless, retail sales did grow for a ninth consecutive month in July, suggesting the underlying trend for consumption remains healthy. Some economists say retail sales could fall in August as heavy rains kept people indoors. Spending is likely to quickly resume growth as strong labor demand boosts consumer sentiment, economists say, although tensions with North Korea may undermine that confidence. Spending on clothes rose 3.5 percent in July from a year ago, which was slower than a 5.3 percent annual increase in June, data from the trade ministry showed on Wednesday. Spending growth on cars also slowed to an annual 6.6 percent in July from 8.7 percent in the previous month. Demand for labor rose to the highest in 43-1/2 years in July, data showed on Tuesday, supporting optimism in the outlook for domestic demand. North Korea's launch of a missile over Japan in the early hours of Tuesday rattled financial markets and could start to weigh on Japan's consumer sentiment if the standoff over its nuclear program worsens.

(Reporting by Stanley White; Editing by Eric Meijer)