Oct 18 (Reuters) - Procter & Gamble ( PG ) reported a

surprise drop in first-quarter sales on Friday, as consumers in

its major markets, the United States and China, switched to

cheaper household and personal care brands.

An uncertain U.S. economy has pushed customers mainly from

the lower-income group to hunt for products at the cheapest

price possible, hurting sales at P&G, as consumers move to

rivals offering discounts, and cheaper private-label brands.

Additionally, a grim demand environment in China has

resulted in P&G underperforming peers such as Nestle and

Unilever.

P&G maintained its annual organic sales growth forecast of a

3% to 5% rise and core earnings per share expectation of $6.91

to $7.05.

Nestle on Thursday cut its annual sales forecast,

noting the demand environment would continue to remain weak and

flagged a drag on volumes from weaker economies such as Latin

America.

Analysts also expect P&G to see a drag to its volumes from

slowing demand in Latin America, China and the Middle East where

people have called to boycott the company's products because of

its connections to Israel.

P&G reported a 1% increase in overall organic volumes in the

first quarter, while the average prices across its product

categories rose 1%.

The company's first-quarter net sales fell 0.6% to $21.74

billion, compared with analysts' estimates of a 0.2% rise to

$21.91 billion, according to data compiled by LSEG. This is the

company's second straight fall in quarterly net sales.

Shares of the Dawn dish soap maker were marginally down in

premarket trading.

P&G reported first-quarter adjusted profit per share of

$1.93, above analysts' average estimate of $1.90, driven by

higher product prices.

(Reporting by Ananya Mariam Rajesh in Bengaluru; Editing by

Shinjini Ganguli)