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Gasoline Prices Boost Retail Sales Figures

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By MARTIN CRUTSINGER, The Associated Press

Published: February 14, 2008

WASHINGTON - Retail sales posted a surprising rebound in January following a dismal December, though much of the strength reflected rising gasoline prices. Economists saw the increase as a temporary blip rather than a sustained recovery.

The Commerce Department reported Wednesday that retail sales rose by 0.3 percent last month after having fallen by 0.4 percent in December as retailers suffered through their worst Christmas shopping season in five years. The increase was led by higher demand for new cars and a big jump in sales at gas stations that mainly reflected rising pump prices.

The better-than-expected gain did little to change the view of economists who are forecasting the economy will fall into a recession in the first half of this year. But they said the slump should be shorter and milder given that Congress quickly passed and President Bush signed on Wednesday a $168 billion stimulus package designed to jump-start growth by showering consumers with rebate checks starting in May.

The January gain in retail sales came as a surprise following reports from the nation's big retailers that January had been a disappointing month. Wal-Mart had said strapped consumers were using holiday gift cards to buy basics such as diapers and laundry detergent rather than iPods and the latest DVDs.

Economists had forecast a 0.3 percent drop in January sales. They said that without the big jump in gasoline, sales would have risen by 0.1 percent. They pointed to numerous areas connected to the troubled housing industry where sales took a tumble, including declines at furniture, hardware and appliance stores.

Given the troubles facing the economy from a prolonged slump in housing to rising food and energy costs, job losses and turbulent financial markets, analysts said it was not surprising to see lackluster retail sales. Consumer spending is closely watched because it accounts for two-thirds of economic activity.

"Consumer spending is still decelerating quite dramatically," said Nariman Behravesh, chief economist at Global Insight, a private forecasting firm, which predicts the economy will be in a recession in the first half of this year, contracting at annual rates of 0.4 percent in the current quarter and 0.5 percent in the second quarter.

"It will be one of the milder recessions we have had. We don't expect anything awful, but it will be a recession," he said.

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