US retail sales rebound, jobless claims stay high

Sales at US retailers unexpectedly rebounded in January, government data showed, but the recovery was unlikely to be sustainable as recession-hit companies continued to aggressively axe jobs.

The jump in sales, probably boosted by post-holiday discounts, was at odds with other reports that still painted a gloomy picture for the world's largest economy, which has been mired in recession since December 2007.

"Given all the other contrary information about consumer spending and jobs, this seems to me more like a fluke or an unsustainable recovery.

"It's a one-month wonder," said Stuart Hoffman, chief economist at PNC Financial Group in Pittsburgh.

The Commerce Department said retail sales rose one per cent in January, advancing for the first time in seven months, after slumping by a downwardly-revised three per cent in December. November sales were also revised to show a steeper fall.

January's sales gain was the biggest since November 2007 and confounded economists' expectations for a 0.8 per cent fall. But compared with January last year, sales dived 9.7 per cent.

Economists said the downward revisions to the November and December figures indicated the government's estimate showing the economy had shrunk at an annual rate of 3.8 per cent in the fourth quarter would be revised to show a deeper contraction.

"We now forecast a decline of five per cent in the fourth quarter. Price changes probably played an important role in the January rise in retail sales," said Brian Fabbri, North America chief economist at BNP Paribas in New York.

US stocks eked out late gains after falling sharply during the session, following a Reuters report that Obama Administration was working on a programme to subsidise mortgage payments for troubled homeowners. The Standard & Poor's 500 Index ended up 1.45 points at 835.19.

Treasury debt prices ceded gains to end mostly flat.

The Commerce Department retail report showed broad gains across the board, with gasoline sales jumping 2.6 per cent, their biggest increase in seven months, after sliding 15.6 per cent in December. The sales gain reflected higher prices.

Sales of building materials fell 3.2 per cent after dropping 2.3 per cent in December.

"It would be premature to conclude that US consumers are back on the spending wagon. The employment picture continues to dim. These income worries combine with wealth worries to undercut consumer confidence," said Michael Gregory, an economist at BMO Capital Markets in Toronto.

Separately, the Labour Department said the number of people staying on unemployment benefits after drawing an initial week of aid rose by 11,000 to a record 4.81 million in the last week of January.