Consumers, lured to the malls by unusually warm weather in January and eager to spend their Christmas gift cards, boosted retail sales outside of autos by the largest amount in more than six years, the government reported Tuesday.
The Commerce Department said retail sales excluding autos were up 2.2 percent in January, the best showing in this category since late 1999. With autos included, retail sales rose by 2.3 percent, the best showing in 20 months. Overall retail sales had risen by a tiny 0.4 percent in December.
Analysts had been expecting a rebound, in part because the weather in January in the Northeast and Midwest was the mildest in more than a century. The warmer-than-usual weather meant that consumers, buoyed at not having to spend as much on home heating bills, trooped to the stores to redeem the gift cards they had received in December.
But at least one retailer, Target Corp., reduced its sales forecast for February, citing the impact of the record-breaking snowstorm that hit the Northeast on Sunday.
The 2.3 percent rise in total sales was the largest one-month gain since a similar increase in May 2004. The 2.2 percent increase in sales outside of autos was the biggest increase since a 2.5 percent surge in December 1999, a period when the U.S. economy was in the midst of the longest expansion in history.
The strength last month was led by a 2.9 percent jump in sales at auto dealers, the best showing since a 5.5 percent increase last November. Sales were also strong at department stores, furniture stores and clothing stores.
Economists believe that economic growth, after slowing to a modest pace of 1.1 percent in the final three months of 2005, is rebounding sharply in the current quarter. Some economists are forecasting that economic output in the January-March period could surge at an annual rate as high as 5 percent.
The Federal Reserve under new chairman Ben Bernanke is closely watching the economy to make sure that surging growth does not spur unwanted inflation. Bernanke will deliver a new economic forecast to Congress on Wednesday.
Investors will be listening for any clues about if and when the Fed will stop its recent string of interest rate hikes, reports CBS News MoneyWatch correspondent Alexis Christoforous. Many analysts believe he will signal that the central bank, which has already raised interest rates 14 times, is prepared to nudge rates even higher, with another quarter-point boost at its March 27-28 meeting.
The retail sales report showed that sales at furniture stores climbed by 3.7 percent in January while sales at hardware stores were up 3.4 percent and appliance stores show a 2 percent rise.
Sales of clothing got a boost from the warm weather as shoppers snapped up spring outfits. Sales at clothing stores rose by 4.2 percent, the best gain since October 2002, while sales at department stores and other general merchandise store rose by 2.1 percent, the best showing since May 2004.
Sales at service stations were up 5.5 percent but analysts said much of that gain reflected higher pump prices. Sales at restaurants and bars rose by 3.2 percent, the best showing in five years.