US retail sales up modestly

US retail sales rose less than expected in January, hurt by discounting in the auto sector, but a rebound in an underlying measure of sales suggested a solid underpinning for the economy's recovery. Total retail sales increased 0.4 percent last month, the Commerce Department said on Tuesday, below economists' expectations of a 0.7 percent increase.
Sales excluding autos, gasoline and building materials rebounded 0.7 percent after falling 0.4 percent the prior month. "I don't think there's anything here that really brings into question the fact that the economy has been improving," said Wayne Kaufman, chief market analyst at John Thomas Financial in New York.
Another report on Tuesday showed confidence among small US business owners hit a four year-high in January, according to the National Federation of Independent Business. With the economy strengthening, there is a good chance the Federal Reserve will raise interest rates before the end of 2014, according to a Reuters poll of economists. The Fed has said it expects to hold rates low through the end of that year.
Still, with the unemployment rate at 8.3 percent in January, a significant minority still expect a further easing of monetary policy in coming months. In the retail sales report, spending at gasoline stations rose 1.4 percent - the biggest gain since March 2011 - while receipts for electronics increased 0.5 percent.
Dampening the overall increase, sales of cars and autoparts dropped 1.1 percent, while purchases at non-store retailers, a category dominated by online sales, also fell 1.1 percent. The decline in auto receipts was surprising given that motor vehicle sales in January were the highest in nearly two-and-a-half years. But the increase in core sales, which correspond most closely with the consumer spending component of the government's gross domestic product report, suggested consumers were not growing more timid.
"The headline number was a little weaker than expected but the core figure was better so net-net it was not entirely a negative report," said Boris Schlossberg, director of currency research at GFT in Jersey City, New Jersey. The government revised downward its estimates of retail sales in both December and November, suggesting consumers did not spend as much as previously thought during the holiday shopping season.
In another report, the Commerce Department said business inventories rose 0.4 percent to $1.56 trillion in December. Economists polled by Reuters had forecast inventories increasing 0.5 percent in December. A separate report from the Labour Department showed US import prices rose a touch more than expected in January as petroleum and food prices rebounded strongly.