WRAPUP 5-US retail sales rise as shoppers fight winter blues

* Retail sales unexpectedly rise, buoy recovery hopes

* Sales ex-autos beat expectations, core sales rise

* Economists see growing consumer contribution to GDP

* Consumer sentiment eases in March
(Updates with closing market action)

By Lucia Mutikani

WASHINGTON, March 12 (BestGrowthStock) – U.S. retail sales rose
unexpectedly last month despite heavy snow storms that were
thought to have kept shoppers at home and bolstered hopes of a
sustainable economic recovery.

Optimism about Friday’s report was tempered by a slip in
consumer confidence early this month. Worries about stubbornly
high unemployment held back sentiment, even though the economy
appears to be on the cusp of creating jobs.

“The manufacturing recovery is starting to broaden out to
the key consumer area of the economy. Consumers are keeping up
their end of the bargain to ensure the recovery from recession
is a sustainable one,” said Chris Rupkey of the Bank of
Tokyo-Mitsubishi in New York.

Sales rose 0.3 percent, the Commerce Department said, as
consumers bought an array of goods from necessities to luxury
items. Analysts had expected sales to slip 0.2 percent. January
sales, however, were revised down to a gain of 0.1 percent from
the previously reported 0.5 percent rise.

U.S. stocks (Read more about the stock market today. ) initially rose on the retail sales data but
lost steam, and major indexes ended flat on the surprise drop
in consumer confidence. U.S. government debt prices rose as
investors focused on the weak sentiment data, while the dollar
tumbled to a one-month low against the euro.

The sales report was the latest in a series of data hinting
at building underlying strength in an economic recovery that
has been largely driven by government stimulus and a swing
toward inventory building by businesses.

Officials from the Federal Reserve meet on Tuesday and are
expected to hold overnight interest rates in a range of zero to
0.25 percent and maintain a pledge to keep them ultra-low for
an “extended period” to foster a more robust recovery.

Stronger data, however, could spark a lively discussion at
the meeting, as some officials have raised concerns about the
inflationary impact of keeping rates too low for too long.
[ID:nN10148647]

Treasury Secretary Timothy Geithner said on Friday the
economy was gradually strengthening across the board, but
cautioned it would take time to fully recover. [ID:nN12152333]

The rise in spending came even as consumers were turning
more sour. Thomson Reuters/University of Michigan’s Surveys of
Consumers’ index on consumer sentiment slipped to 72.5 from
73.6 in February. That was below market expectations for 73.6.
For details see: [ID:nN12128535]

LABOR MARKET KEY

Economists, however, warned against placing too much weight
on the dip in sentiment, saying it was not a good predictor of
future sales. Consumer spending has continued to surprise on
the upside even with confidence trending lower.

“What is more important is what happens in the job market
and that market is improving. February was distorted by storms,
but the underlying trend is up and March will be strong,” said
Bill Cheney, chief economist at John Hancock Financial Services
in Boston.

Sluggish consumer spending had fed worries the economy’s
recovery from the worst downturn in seven decades could falter
when support from government stimulus and the swing in the
inventory cycle disappears.

Motor vehicle and parts purchases extended their decline
last month, falling 2 percent, likely reflecting a drop in
demand by consumers nervous about vehicle recalls by Toyota
Motor Corp. Excluding motor vehicles, retail sales rose 0.8
percent, building on a 0.5 percent rise the prior month.

Even more encouraging, core retail sales — which
correspond most closely with the consumer spending component of
the government’s gross domestic product report — increased 0.9
percent after rising 0.6 percent in January.

“This implies that personal consumption is on track to
exceed 2.0 percent for the first quarter of the year and bodes
well for a greater than 3.0 percent print on gross domestic
product,” said Joseph Brusuelas, chief economist at Brusuelas
Analytics in Stamford, Connecticut.

A second report from the Commerce Department showed
business inventories were unchanged in January after falling by
0.3 percent in December.

Inventories are a key component of gross domestic product
changes over the business cycle and a sharp slowdown in the
pace of inventory liquidation handed the economy its fastest
growth rate in six years in the fourth quarter.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Graphic on retail sales: http://link.reuters.com/waz73j
Instant view on retail sales: [ID:nN12121373]
Instant view on consumer confidence [ID:nN12128245]
March sentiment dips: http://link.reuters.com/qac83j
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Stock Report
(Additional reporting by Glenn Somerville in Washington and
Caroline Valetkevitch in New York; Editing by Chizu Nomiyama)

WRAPUP 5-US retail sales rise as shoppers fight winter blues