Rent-to-own News - Retail sales rise in January, with and without auto sales

Americans rebounded from a weak holiday season and increased spending on retail goods in January, an encouraging sign for the strengthening economy.

The overall January figure was an improvement from December, which was downwardly revised to show a flat reading. And when excluding autos and gasoline station sales, retail spending jumped 0.6% — best showing in three months, according to USA Today.

The "retail sales data are better than they look, but they don't suggest that consumption growth is about to set the economic recovery alight," Paul Dales, an economist at Capital Economics, wrote in a note to clients.

The government's retail sales report is its first look each month at consumer spending, which represents 70% of economic activity. The positive data suggest that hiring gains have encouraged more people to spend, which should lead to stronger growth.

Retail sales have risen about 21% since hitting a recession low. And they're nearly 6% above their pre-recession high.

Sales at gasoline stations rose 1.4% last month, the most in 10 months. Gas prices have risen steadily in recent months. The average price for a gallon of gas was $3.51 Monday, up 12 cents from a month earlier.

Earlier this month, big chain retailers reported a solid increase in January sales. The gains weren't evenly spread. Lower-priced stores such as Target and Costco reported big gains. Macy's and other stores that sell mid-priced goods didn't do as well.

The government's monthly report is a broader gauge of retail sales. It covers purchases at all retailers, including auto dealers, restaurants and bars, grocery stores and gasoline stations.

Economists had expressed concern that consumers might pull back on spending this year because their wages hadn't kept pace with inflation. And many consumers relied on savings to make up the difference.

The report suggests consumers are managing to increase spending at the same pace they did late last year, despite only small gains in pay.

"The good news is that the strong January gain establishes that the consumer trend is not folding," said Pierre Ellis, an economist at Decision Economics.

Consumers are taking on more debt after cutting back in the aftermath of the recession. Consumer borrowing, which includes credit cards, auto loans, and student loans, posted the biggest monthly gains in a decade in November and December.

Hiring has picked up in recent months, which could support more spending. Employers added 243,000 net jobs last month, fifth straight month of solid hiring.

The economy, meanwhile, expanded at an annual rate of 2.8% in the final three months last year. Growth may slow a bit from that pace in the current quarter. Many economists forecast modest growth of 2% to 2.5% this year.