Sales at US retailers rose unexpectedly in February despite a drop in vehicle purchases and inclement weather that was expected to curtail shopping, bolstering hopes of a sustainable economic recovery.
But worries about stubbornly high unemployment held back consumer sentiment early this month, which could potentially restrain spending.
Total retail sales rose 0.3 per cent, the Commerce Department said today, as consumers bought an array of goods from necessities to luxury items.
Sales for January were, however, revised down to only a gain of 0.1 per cent from the previously reported 0.5 per cent rise.
Analysts polled by Reuters had forecast retail sales slipping 0.2 per cent last month. Compared to February last year, sales were 3.9 per cent higher.
"I think it keeps hinting that the US recovery is intact and ongoing. There's been a lot of worry about how the economy will transition from government spending to consumer spending and we're starting to see some evidence of that," said Camilla Sutton, a senior currency strategist at Scotia Capital in Toronto.
Separately, 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.
"It's more important to watch what consumers do rather than what they say. Certainly there is a little different tone between the retail sales and the confidence figures," said Kevin Flanagan, chief fixed-income strategist at Morgan Stanley Smith Barney in New York.
US stocks initially found support from the retail sales data, but lost steam and major indexes turned negative on the surprise drop in the consumer confidence reading. US government debt prices were flat.
Consumer spending has been sluggish as high unemployment squeezes household income, leading to worries that the economy's recovery from the worst downturn in seven decades could falter when support from government stimulus and the inventory swing disappears.
Officials from the Federal Reserve meet next week and are expected to hold overnight interest rates in a range of zero to 0.25 per cent and maintain a pledge to keep them ultra-low for an "extended period" to try to foster a stronger recovery.
Stronger data, however, could foster a lively discussion at the Fed meeting, as some members have raised concerns about the inflationary impact of keeping rates too low for too long.
Motor vehicle and parts purchases fell 2 per cent last month, likely reflecting a drop in demand by consumers nervous about vehicle recalls by Toyota Motor. They fell 1.5 per cent in January.
Excluding motor vehicles and parts, retail sales rose a bigger than expected 0.8 per cent in February after rising 0.5 per cent the prior month. Economists had expected a 0.1 per cent gain.
Core retail sales, which exclude autos, gasoline and building materials, increased 0.9 per cent after rising 0.6 per cent in January. Core sales correspond most closely with the consumer spending component of the government's gross domestic product report.
Sales of building materials and garden equipment rose 0.5 per cent, defying expectations of a decline following severe winter storms that slammed parts of the country last month. Gasoline receipts rose 0.3 per cent, while sales at sporting goods, hobby and book stores jumped 1.2 per cent after falling 0.6 per cent in January.
Receipts at electronics and appliance stores soared 3.7 per cent, while sales at general merchandise stores increased 1.0 per cent.
Reuters