January Consumer Sales Leap

WASHINGTON — U.S. retail sales soared in January as warm weather and gift card redemptions spurred shoppers, setting the stage for a first-quarter rebound in economic growth -- and more interest rate hikes from the Federal Reserve.

Seasonally adjusted retail sales surged 2.3% over December, nearly triple the expected increase and the largest gain since May 2004, a report released by the Commerce Department on Tuesday showed. Excluding demand for cars and parts, retail sales were up 2.2% for the largest rise in more than six years.

Analysts said unusually warm winter weather and gift cards -- which are rung up when they are redeemed rather than sold -- probably exaggerated purchasing strength. That means retailers may see a pullback in February.

“It was a warm month, no snowstorms or anything like that. In fact, we might see some giveback in February because we already see the first chain-store sales for the week ending Saturday were down because of the snowstorm,” said Elisabeth Denison, an economist at Dresdner Kleinwort Wasserstein in New York.

Analysts had forecast a 0.8% overall increase and a 0.7% gain excluding cars. The larger-than-expected jump prompted them to raise expectations for first-quarter economic growth after the fourth quarter’s anemic 1.1% annualized gain.

However, surging consumer demand could increase the likelihood of more rate increases from the Federal Reserve.

January’s robust sales growth was offset slightly by a downward revision in December’s data. Sales were up just 0.4% that month, rather than the initially reported 0.7% gain. The rise outside the auto sector was unchanged at 0.2%.

Sales of motor vehicles and parts surged 2.9% in January, building on December’s 1.2% gain, while sales at gasoline stations rocketed 5.5%. Excluding cars and gasoline, retail sales were up 1.8% in January, the largest increase since March 2004.

Demand was firm across nearly all major retail categories in January. Furniture sales rose 3.7%, electronics and appliance sales climbed 2% and building materials and garden equipment surged 3.4%. Sales of clothing advanced 4.2%, the largest gain since October 2002.

In a separate report, the Commerce Department said U.S. business inventories climbed 0.7% in December, surpassing the 0.5% growth expected by Wall Street, and November’s gain was revised up to 0.6% instead of the initially reported 0.5%. Together, the increases could prompt forecasters to boost expectations for fourth-quarter growth.