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* BMW July brand sales 139,399 cars vs. Audi's 144,000
* BMW YTD sales lead over Audi shrinks 40 pct to 12,397 cars
* BMW has lower momentum in Europe, U.S. (Adds peer comparison, detail and background)
BERLIN/FRANKFURT, Aug 8 (Reuters) - BMW's lead over German rival Audi is shrinking, despite increasing deliveries in July, as the luxury-car leader posts lower volume growth in the United States and Europe.
BMW said on Friday that sales of premium cars and sport-utility vehicles at its core brand rose 8.4 percent last month from a year earlier to 139,399 autos. Audi, Volkswagen's flagship luxury brand, announced on Thursday 144,000 deliveries in July.
July was the third month this year that saw Audi outsell BMW, which has been the premium-car sales leader since overtaking Daimler's Mercedes-Benz division in 2005. Audi, which has ranked second since 2011, and Mercedes have each vowed to take the top spot by the end of the decade.
BMW said seven-month brand sales increased 10 percent to a record 1.03 million autos. Still, Audi has shrunk the year-to-date sales gap to BMW to 12,397 autos despite an ageing model lineup.
A year ago the gap was 21,035 autos, so it has narrowed by 40 percent this year, according to company records.
Weakening momentum at BMW reflects lower sales gains in core European markets and the United States, where seven-month group deliveries, including the Mini and Rolls-Royce brands, were up 2.8 percent and 5.4 percent respectively.
By comparison, Audi's sales increased 6.7 percent in Europe and 13 percent in the United States. VW's flagship division has also been growing faster in China than BMW and Mercedes.
BMW Chief Executive Norbert Reithofer said in a June 2 interview with German magazine Automobilwoche that the carmaker was reconsidering to what extent competing with rivals Audi and Mercedes for the title of luxury-sales champion was still a priority for BMW. (Reporting by Andreas Cremer and Maria Sheahan; Editing by Christoph Steitz and Susan Fenton)