Retail Sales Stage Unexpected Rebound

WASHINGTON (Reuters) – Sales at retailers unexpectedly rose 0.3percent in January, partly reflecting stronger sales of new cars andgasoline, according to a Commerce Department report on Wednesday.

January’s sales increase followed a 0.4 percent decline in Decemberand was contrary to Wall Street analysts’ forecasts for a 0.2 percentdecline. The surprise sales rise caused stock futures to jump on hopesit meant the United States had a better chance of skirting a recession.

Prices for U.S. debt securities fell while the dollar’s value strengthened against other major currencies.

Excluding autos, January sales still rose 0.3 percent, reversing a0.3 percent decline in December sales. Wall Street analysts wereexpecting a 0.2 percent gain in sales excluding autos.

"The data is clearly a surprise to the upside," said Omer Esiner, amarket analyst with Ruesch International in Washington, D.C. "In thenear term, it does ease some recession concerns."

Despite the higher headline number for sales, there were declines inmany categories that implied consumer spending was being pinched.Furniture sales fell 0.5 percent in January, building material saleswere down 1.7 percent and department store sales declined by 1.1percent.

Many analysts think the slowing U.S. economy faces increasing risksof tumbling into recession and are closely watching for signs thatconsumers, who fuel 70 percent of national economic activity, will keepscaling back spending.

Jim Awad, chairman of W.P. Stewart & Co. Ltd. in New York, saidthat while the January sales numbers will raise hopes that a recessioncan be avoided, it may be short-lived because of other indications thatconsumers are facing pressure as housing prices fall.

"After the impulsive positive buying, people will say this issubject to revision and it’s inconsistent with other incoming dataindicating softness and weakness in the economy," Awad said.

Gasoline sales rose 2 percent in January after being flat inDecember, but analysts said that likely reflected higher prices, notstronger demand.

Excluding gasoline, January retail sales rose 0.1 percent.

A separate report showed mortgage applications fell last week from highest level in nearly four years as mortgage rates rose.

MORTGAGE APPLICATIONS DECLINE

In a separate report, the Mortgage Bankers Association said its homeloan application index fell 2.1 percent in the week ended February 8 asboth home purchase and refinance applications slipped.

Applications for home refinancing had been particularly strong overthe past month as average 30-year mortgage rates slumped as low as 5.49percent in mid-January. Last week however, rates rose by 0.11percentage point to 5.72 percent.

(Additional reporting by Lynn Adler, Gertrude Chavez and Ellis Mnyandu in New York, )

(Reporting by Glenn Somerville, editing by Joanne Morrison)

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