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U.S. Retail Sales Unexpectedly Show Modest Rebound In January

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A report released by the Commerce Department on Monday showed a modest increase in U.S. retail sales in the month of January.

The Commerce Department said retail sales rose by 0.2 percent in January after tumbling by a revised 1.6 percent in December.

Economists had expected retail sales to come in unchanged compared to the 1.2 percent slump originally reported for the previous month.

The rebound in retail sales came despite a substantial decrease in sales by motor vehicle and parts dealers, which nosedived by 2.4 percent in December after rising by 0.3 percent in December.

Excluding the steep drop in auto sales, retail sales climbed by 0.9 percent in January after plummeting by a revised 2.1 percent in December.

Ex-auto sales had been expected to increase by 0.3 percent compared to the 1.8 percent plunge originally reported for the previous month.

The stronger than expected ex-auto sales growth reflected sharp increases in sales by sporting goods, hobby, musical instrument, and book stores and building materials and supplies dealers.

Sales by non-store retailers, health and personal care stores, and grocery stores also saw notable growth, while sales by gas stations continued to fall sharply amid lower gasoline prices.

Closely watched core retail sales, which exclude autos, gasoline, building materials and food services, jumped by 1.1 percent in January after plunging by 2.3 percent in December.

Andrew Hunter, Senior U.S. Economist at Capital Economics, noted downward revisions to control group sales in December and November mean sales expanded by just 0.4 percent annualized in the fourth quarter.

"But the bigger concern is that, even allowing for further gains in February and March, control group retail sales growth is on course to remain unusually weak in the first quarter," Hunter said.

He added, "Along with the weakness in vehicle sales, that suggests real consumption growth will slow further in the first quarter and supports our forecast that GDP growth is set to slow to below its 2% potential pace."

The Commerce Department said the annual rate of retail sales growth accelerated to 2.3 percent in January from 1.6 percent in December.

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