Retail Sales Post Largest Increase in 5 Months

U.S. retail sales rose more than expected in February as Americans bought motor vehicles and a range of other goods even as they paid more for gasoline, suggesting consumer spending this quarter will hold up despite higher taxes.

The Commerce Department said on Wednesday retail sales increased 1.1%, the largest rise since September, after a revised 0.2% gain in January.

Economists polled by Reuters had expected retail sales, which account for about 30% of consumer spending, to rise 0.5% last month after a previously reported 0.1% gain in January.

So-called core sales, which strip out automobiles, gasoline and building materials and correspond most closely with the consumer spending component of gross domestic product, rose 0.4% after advancing 0.3% in January.

The rise in core sales was the latest to suggest momentum in the economy as fiscal policy tightened, marked by the end of a 2% payroll tax cut and an increase in tax rates for wealthy Americans on Jan. 1.

Job gains accelerated in February and manufacturing put in its best performance in 1-1/2 years. The gains in core sales in the first two month of year offered hope that consumer spending, which accounts for about 70% of the U.S. economy, would probably not slow much this quarter after growing at a 2.1% annual rate in the fourth quarter.

That should help boost economic growth after it barely expanded in the last three months of 2012.

Despite paying 35 cents more for gasoline at the pump, consumers also bought automobiles last month. Receipts at auto dealerships rose 1.1% after falling 0.3% in January. Excluding autos, retail sales increased 1.0%, also the largest increase in five months. That followed a 0.4% advance in January.

Last month, the high gas prices helped to lift sales at gasoline stations by 5.0%, the largest increase since August. They had risen 0.7% in January. Excluding gasoline, sales rose 0.6%.

Sales at building materials and garden equipment suppliers increased 1.1%, reflecting gains in homebuilding as the housing market recovery gains momentum. Receipts at clothing stores gained 0.2%.

Delays in tax refunds probably hurt sales at restaurants and bars, which fell 0.7%, while receipts at sporting goods, hobby, book and music stores declined 0.9%. Sales of electronics and appliances slipped 0.2%, while receipts at furniture stores dropped 1%.