* Retail sales up 0.4 percent, autos post surprise fall
* Rise in sales ex-autos largest in 10 months
* "Core" sales rebound, point to underlying strength
By Lucia Mutikani and Jason Lange
WASHINGTON, Feb 14 U.S. retail sales
picked up last month after a sluggish December, providing a firm
foundation for the economy's recovery.
Sales rose 0.4 percent in January after being flat the prior
month, the Commerce Department said on Tuesday.
The January reading was weaker than economists had expected
because auto dealers took in less cash. Excluding autos, sales
rebounded a solid 0.7 percent, the biggest gain in 10 months.
"The consumer is spending and there is certainly no sign of
a recessionary downturn, but spending patterns reflect a
deleveraging consumer weighted by weak growth and a higher cost
of living," said Steve Blitz, chief economist at ITG Investment
Research in New York.
So-called "core" retail sales, which go into the calculation
of U.S. gross domestic product, rose 0.7 percent after declining
0.4 percent in December. Core sales strip out autos, gasoline
and building materials.
Investors on Wall Street took a dim view of the report and
the Standard & Poor's 500 index retreated from a near
seven-month high. Prices for U.S. Treasury debt rose and the
dollar rose against a basket of currencies.
GASOLINE PRICES RISING
While the economy is expected to take a step-back in the
first half of the year, a firming labor market and solid
manufacturing are seen providing a cushion.
Automakers reported the strongest sales in nearly 2-1/2
years in January, but that was supported by discounts and strong
fleet sales. The government, which measures retail sales in
dollars, counts fleet sales as a business capital expenditure,
not retail activity.
Other data on Tuesday showed confidence among small U.S.
business owners rose for a fifth straight month in
But economists are worried that a recent increase in
gasoline prices, which contributed to the gain in retail sales
last month, could hurt spending in the months ahead.
"The rise in gasoline prices will likely take a toll on
spending in coming months unless income growth improves," said
Mark Vitner, a senior economist at Wells Fargo Securities in
Charlotte, North Carolina.
Still, the retail sales report adds to a recent run of
fairly upbeat economic data, which some analysts say reduce the
need for the Federal Reserve to ease monetary policy further
through a third round of bond purchases.
A Reuters survey of economists published on Tuesday showed a
35 percent chance of more Fed bond purchases. It also found that
economists see a 50-50 chance that the central bank could raise
interest rates before the end of 2014. The Fed said last month
it expected to keep rates low until then.
But with unemployment still at an uncomfortably high 8.3
percent, the Fed is still actively debating its next step.
San Francisco Federal Reserve Bank President John Williams
said on Monday it was vital to "keep the monetary policy
throttle wide open."
His counterpart at the Philadelphia Federal Reserve Bank,
Charles Plosser, took an opposing view, decrying the
"accelerationist approach to monetary policy."
"I'm not anxious to step on the brake, but I'm not anxious
to cut a hole in the floorboard so I can go faster either," he
The rise in spending at gasoline stations in last month was
the biggest since March of last year. The government revised
downward its estimates of retail sales for both November and