Retail sales post rise in January

WASHINGTON -- A modestly better-than-expected report on retail sales for January could suggest stronger economic growth in coming months, although this week's severe snowstorms will likely depress activity in February.

The 0.5 percent gain the Commerce Department reported Friday exceeded the 0.3 percent rise economists had expected. Strength came from a surge at general merchandise stores. These include big chains such as those owned by Wal-Mart Stores Inc. Excluding autos, sales rose 0.6 percent.

Higher consumer spending is vital because it accounts for about 70 percent of economic activity. Economists caution, though, that the spending increases seen since summer could falter as the jobs crisis weighs on a fledgling recovery.

They noted a second report that showed consumer confidence slipped in early February. The Reuters/University of Michigan consumer sentiment index dipped to 73.7 for early February. That was down from 74.4 in January.

Some analysts said the unsettled global economy is eroding confidence that the United States can sustain a recovery from the worst recession in decades.

A debt crisis in Greece has plunged the euro, the currency used by 16 European nations, into the worst turmoil since it was launched 11 years ago. Financial markets fear a domino effect that could derail a global rebound.

Greek Prime Minister George Papandreou criticized the European Union on Friday for being too "timid" and slow in its support for Greece.

Concerns about the global economy also were raised by China's move to restrict lending for a second time in a month to cool a credit boom. The order for banks to increase reserves against bad loans renewed fears that a flood of lending in China might be fueling a bubble in stock and real estate prices.

But economists said the biggest threat to the U.S. economy remains the reluctance of U.S. consumers to keep spending.

"We expect that lingering high unemployment, weak income growth, low confidence, tight credit conditions and the continuing need to deleverage will constrain consumption growth for at least this year and possibly well beyond," said Paul Ashworth, senior U.S. economist at Capital Economics.

Adding to the caution was a separate Commerce report on businesses' inventories. It said companies reduced their stockpiles 0.2 percent in December. Economists had expected firms to boost their inventories 0.2 percent.

The dip in inventories shows businesses are reluctant to add to their stockpiles because they think consumer demand and the recovery will remain weak.

Still, total business sales rose 0.9 percent in December. That followed an even stronger 2.4 percent gain in November.

The economy grew at an annual rate of 5.7 percent from October through December, the best showing in six years. But analysts warn that growth could slow in coming months as the benefits of government stimulus programs fade and unemployment remains near double digits.

Many economists cautioned that retail sales were likely to fall in February because of the impact of winter storms that have hit most of the country in the past week.

The storms are a particular problem for apparel stores with mostly lightweight items on their floors. Merchants ended December with relatively little excess supply, and as a result, some stores moved up their deliveries of spring items, from jumpsuits to sandals.

But those items aren't exactly what shoppers trudging through snow are thinking about now.

On the other hand, supermarkets, drug stores and home improvement chains haven't likely been hurt as much. The rush to buy items like shovels and food in the hours before the storms likely offset slower business later this week when shoppers were snowed in, according to Joel Bines, director in the retail practice of AlixPartners.

For the retail industry overall, February is the second-least important month, after January. Retailers use these months to clear out winter items and bring in spring merchandise.

So even if the nation is hit hard by more snowstorms in the next few weeks, "it's not going to kill the spring selling season," said Brean Murray analyst Eric Beder.

Economists said the winter storms could skew the results of some economic reports in February, from retail sales to unemployment. That would make it even harder to divine a direction for a recovery that's proceeding in fits and starts.

The 0.5 percent increase in retail sales in January followed a 0.1 percent decline in December. The December figure was revised up from an initial report that sales fell 0.3 percent that month. In November, sales had surged 2 percent.