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Retail Sales Rose 1% in February; Business Inventories Also Up

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Shoppers snapped up new cars, clothing and electronics in February, pushing retail sales up for the eighth straight month.

Retail sales rose 1% last month, the Commerce Department reported Friday. Part of the gain reflected higher prices for gasoline. Still, excluding sales at gas stations, retail sales rose a solid 0.9%.

February's jump in sales followed a strong upward revision that showed a 0.7% increase in January. That was more than double the original estimate.

Sales totaled $387.1 billion, up 15.3% from the recession low reached in December 2008. A Social Security tax cut and rising employment will likely encourage consumers to spend more this year, although higher gas prices will cut into their disposable income.

"This is a very encouraging report," said Paul Ashworth, chief U.S. economist at Capital Economics. He said spending should be a strong 3% or more in the first three months of this year. This category is closely watched because it accounts for 70% of total economic activity.

The tax cut is "undoubtedly still providing a temporary boost," Ashworth said. But he cautioned that higher energy prices would start affecting household budgets in the next month or two.

Separately, the Labor Department said job openings fell by 161,000 in January, or a 5.5% decline. Half of the drop was the result of fewer jobs advertised by state and local governments, many of which are grappling with budget crises.

Sales by retailers, wholesalers and manufacturers rose 2% in January, the CommerceDepartment said in a second report. That was the seventh consecutive gain and the strongest since last March. Higher sales encouraged companies to boost inventories 0.9%, the 13th consecutive gain. The rise in sales and inventories should translate into increased production by manufacturers.

In other economic news, businesses added to their stockpiles in January for a 13th consecutive month and total sales rose by the largest amount in 10 months.

Business inventories rose 0.9% in January, the CommerceDepartment said Friday. Sales for all businesses at the manufacturing, wholesale and retail level increased 2%, the seventh consecutive gain and the largest since March. Healthy gains in sales and inventory restocking should translate into strong orders for U.S. factories.

The string of increases in inventories pushed stockpiles to $1.45 trillion in January. That's a level that economists consider to be healthy for this stage of the recovery. It's 10.1% higher than the recent low of $1.32 trillion reached in September 2009.

Manufacturing has helped to lead the economic recovery. Economists expect that will continue as long as businesses are seeing strong demand. A separate report Friday said sales at the retail level posted a solid 1% gain in February.

In January sales were up at all levels of business, led by a 3.4% jump in demand at the wholesale level.


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