US retail sales rose less than expected in January as consumers cut back on car purchases, but a rebound in an underlying measure of sales suggested a solid underpinning for the economy's recovery.
Total (Other OTC: TTFNF.PK - news) retail sales increased 0.4pc last month, the Commerce Department said today. Economists polled by Reuters had forecast a 0.7pc increase.
However, core retail sales, which exclude cars, gasoline and building materials, climbed 0.7pc in January.
"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 (Frankfurt: A0DKRK - news) .
Fears of a sharp slowdown in the US economy have faded in recent weeks on signs that the job market is picking up and manufacturing is accelerating.
Confidence (BSE: ZCONFIDE.BO - news) among small US business owners hit a four year-high in January, the National Federation of Independent Business said on Tuesday.
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. The Fed has said it expects to hold rates low through the end of that year.
Still, with the unemployment rate at 8.3pc in January, a significant minority of economists still expect a further easing of monetary policy in coming months.
In the retail sales report, spending at gasoline stations rose 1.4pc - the biggest gain since March 2011 - while receipts for electronics increased 0.5pc.
Dampening the overall increase, sales of cars and autoparts dropped 1.1pc, while shopping at nonstore retailers, a category dominated by online sales, also fell 1.1pc.
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 downwards it estimates for retail sales in both December and November (Stuttgart: A0Z24E - news) , suggesting consumers did not spend as much as previously thought during the holiday shopping season.
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