US retail sales rose in February, but buyers limited their shopping to auto dealers and department stores, while lines for first-time jobless benefits shortened last week, government reports showed on Thursday.
The reports pointed to "an economy holding its own, but one we'd like to see growing more at this stage," said Diane Swonk, chief economist with Bank One in Chicago.
The Commerce department said retail sales rose 0.6 percent to a seasonally adjusted $327.17 billion last month, in line with Wall Street economists' expectations. But sales outside of autos were unexpectedly flat compared with January, defying projections of a 0.5 percent gain.
Separately, the Labour Department said new applications for jobless benefits dipped by 6,000 to 341,000 last week. Analysts had expected about 345,000 new claims.
In mid-morning trading, the Dow Jones industrial average was off 0.38 percent, while the tech-heavy Nasdaq composite hovered close to unchanged. Growth-wary bond traders bid up prices of Treasury securities, bringing yields lower.
Taking some of the sting out of the February data were revisions to the January sales numbers. January retail sales were revised up to a 0.2 percent increase, while sales excluding autos rose 1.2 percent. Previously, January sales had been reported down 0.3 percent overall and up a smaller 0.9 percent without autos.
Economists closely watch retail sales because they comprise a major portion of consumer spending, which accounts for about two-thirds of total economic activity.
The 2.7 percent gain in February auto sales was the biggest advance since March 2003, while a 1.2 percent gain in department store purchases was the biggest since July. Sales of electronics and appliances also rose.
However, sales at furniture stores, sporting goods outlets, book stores and gas stations were all down in February.
Analysts had expected shoppers to put their tax refund checks to work in February. Many filers will be receiving a bigger check from Uncle Sam this spring as a result of tax cuts enacted last year. According to Internal Revenue Service data, about 46 million refunds had been processed through March 5, with the average size about $2,182, up 4.4 percent from refunds in the same period of 2003.
Economists were mildly encouraged by a drop in continued unemployment claims in the week ended February 28 to a 2-1/2 year low. "That's not a lot of layoffs, but it doesn't tell us that there's a lot of hiring," said Robert Brusca, chief economist with Native American Securities in New York.
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