Retail sales up 1% in January

Americans bought a sweater or two, ate out a little more, purchased some gadgets and turned to the Internet in search of bargains in January. These small indulgences provided some relief to suffering stores, boosting retail sales 1%.

The unexpected increase from December, reported by the Commerce Department on Thursday, reversed a six-month decline and marked the biggest increase in 14 months.

But with nearly 5 million Americans still drawing unemployment benefits late last month and the specter of more layoffs to come, economists believe the reversal is unlikely to last. In a sign of how fearful businesses are, they slashed inventories in December by the biggest amount in seven years -- potentially triggering further cutbacks in production and more layoffs.

Clearly, however, any lift in spending is worth watching.

“Consumers began to treat themselves a little better,” said Joel Naroff, president and chief economist at Naroff Economic Advisors Inc.

Whether this is a sign of a thaw in consumer spending or a blip, he won’t know for a few months, he said. But consumers, shell-shocked since the financial meltdown in September, may be moving from “doing nothing to doing a little something,” he said.

“I am not saying that people are going to love the recession, but people are going to learn to live with it,” Naroff said.

The January figures were far better than the 0.8% decline that economists surveyed by Thomson Reuters expected.

Retail sales had plunged a revised 3% in December, which marked the weakest holiday season in several decades.

The Commerce Department report showed strong increases in sales of automobiles and at general merchandise stores -- or “big box” outlets -- though sales at department stores, carrying fewer varieties of items, saw a small decline.

Clothing and accessories stores posted a 1.6% gain, while electronics and appliances rose 2.6%. But shoppers still cut back on furniture, building materials and garden supplies. Furniture and home furnishings sales fell 1.3%; building material sales dropped 3.2%.

Despite the overall leap last month, retail sales were down 9.7% from January 2008.