Retail sales rise in March

By Joanne Morrison

WASHINGTON (Reuters) - U.S. retail sales rose slightly more than expected in March but February sales were much higher than first estimated, pointing to continued strength in consumer demand as the manufacturing sector still falters.

Retail sales rose by 0.7 percent as warmer weather and an earlier-than-usual Easter holiday encouraged shoppers in March. Excluding automobiles and parts, sales were up a somewhat smaller-than-expected 0.8 percent, according to the Commerce Department report.

"Consumer spending has rebounded quite nicely and that may lead to a better-than-expected first-quarter growth rate," said Joel Naroff, economist at Naroff Economic Advisors in Holland, Pennsylvania.

A separate report offering an early read on the manufacturing sector, showed factory activity in the New York region was weaker than expected, thus far, in April after hitting a two-month low in March.

Another Commerce Department report showed U.S. business inventories were up an expected 0.3 percent in February. But excluding autos they advanced by 0.8 percent, the biggest increase in 11 months.

February's gain in overall inventories was in line with the median forecast of analysts polled by Reuters ahead of the report, but it showed an increase in retailer stockpiles as consumer demand has remained strong .

Manufacturing inventories were flat in February, while retailers increased their stockpiles by 0.3 percent. That reflected a 0.7 percent decrease in auto and parts inventories during the month, which was the biggest decline since November.

On the housing front, troubles in the subprime mortgage market pushed a gauge of home builder confident to a four-month low in April, according to the National Association of Home Builders.