Washington, Feb. 13 (Bloomberg) -- U.S. retail sales excluding automobiles rose last month by the most in more than two years, indicating consumers are still a source of support for the U.S. economy. Increased demand for building materials and higher-priced gasoline fueled a 1.3 percent gain in sales not including autos after December's 0.2 percent rise, the Commerce Department said. It was the biggest gain since September 2000 and almost three times the 0.5 percent rise expected by economists in a Bloomberg News survey. Including automobile purchases, all retail sales fell 0.9 percent. ``While there's not likely to be a big acceleration in consumer spending, there's also not likely to be a big drop in the growth rate of spending either,'' said Stephen Stanley, an economist at RBS Greenwich Capital Markets Inc. in Greenwich, Connecticut, before the report. ``Income growth is still OK, and consumers continue to gain money from refinancing.''
Retail sales account for almost 30 percent of the economy, and an increase in purchases underscores how discounts and cheap borrowing costs are still luring shoppers. Federal Reserve Chairman Alan Greenspan said this week that the economy will pick up momentum once people know what will happen in Iraq. Economists had expected a 0.6 percent drop in retail sales to $306.1 billion after a previously reported 1.2 percent gain in December, based on the median of 62 forecasts in a Bloomberg News survey. Sales of building materials increased 2.9 percent in January while sales at sporting goods, hobby, book and music outlets rose 0.3 percent last month, today's report showed. Gasoline service station sales increased 2.7 percent in January after a 1.7 percent rise the month before. Excluding automobiles and gasoline, which are sometimes volatile, sales surged 1.1 percent, the largest since October 2001.
Gas Prices
The price of fuel at the pump rose as high as $1.52 a gallon in January, the most since September 2001. Prices have kept rising, with the average at $1.65 a gallon this week, as the growing threat of a U.S.-led war on Iraq leads to fears that supplies will be disrupted. Sales at car and parts dealerships fell 7.5 percent in January month after rising 7.9 percent the prior month, when General Motors Corp. had its best December in 23 years. That suggests that the December sales pace was unsustainable and that consumers have little pent-up demand for new autos. ``You have an issue of saturation,'' said Vincent Boberski, senior economist at Dain Rauscher Inc. in Chicago, before the report. ``Just about everyone who wanted to buy a new car probably did so.''
Clothing
Sales rose 0.3 percent at clothing and accessory stores after a 0.8 percent increase in December. Sales increased 0.6 percent at general merchandise stores after rising 0.4 percent. Retailers kept inventories lean, leaving fewer goods to discount after the holiday shopping season and helping boost profits. Wal-Mart Stores Inc., the world's largest retailer, and Gap Inc. said sales at stores open at least a year increased last month. Wal-Mart posted a 2.3 percent gain and Gap, the largest U.S. clothing-store chain, had a 16 percent increase. Sales at electronics and appliance stores fell 1.4 percent after rising 0.4 percent. Sales at catalogue companies and Internet merchants fell 0.4 percent after rising 1.3 percent. Sales at food and beverage stores rose 2.6 percent last month after falling 1.3 percent. Sales at restaurants, bars and coffee shops increased 1.1 percent after rising 2 percent. The U.S. economy will probably grow at a 2.6 percent pace this quarter, based on the latest Blue Chip Economic Indicators survey. That's up from a 0.7 percent rate in the fourth quarter and still below the 3 percent to 4 percent rate that economists say is the economy's potential.
Disposable Income
Consumer spending, which accounts for two-thirds of the economy, has kept growing because incomes are still rising. Disposable personal income, or the money left over after tax, jumped 5.9 percent last year, up from a 3.8 percent gain in 2001, a Commerce Department report issued last month showed. The lowest mortgage rates in four decades have spurred a wave of refinancing that has put more cash into Americans' pockets and made big-ticket purchases more affordable. The Mortgage Bankers Association of America's refinancing index was 5470.3 last week. That's above the average of 3388 for all of last year and compares with a record 6926.9 at the start of October that was the highest since the group began keeping records. ``Applications for refinancing are not far off their peaks,'' Greenspan told Congress this week. ``Simply processing the backlog of earlier applications will take some time, and this factor alone suggests that refinancing originations and cash-outs will be significant at least through the early part of this year.'' The jobless rate was 5.7 percent in January. While that was down from an eight-year high of 6 percent in December, most economists say unemployment will probably rise in 2003 because companies are reluctant to hire. The Federal Reserve earlier this week projected that the jobless rate will average between 5.75 percent and 6 percent this year. A decline in stock prices also means that Americans have less personal wealth, which may weigh on spending. The Standard & Poor's 500 Index fell 23 percent last year after dropping 13 percent in 2001 and 10 percent in 2000. The index has declined 7 percent so far this year. ///www.quote.bloomberg.com/