U.S. retail sales up 1.1% in February

Americans spent at the fastest pace in five months in February, boosting retail spending 1.1 percent compared with January.

About half of the jump reflected higher gasoline prices, but even excluding gas purchases, retail sales rose 0.6 percent.

The report Wednesday from the Commerce Department showed that Americans kept spending last month despite higher payroll taxes that took effect this year. The retail sales report is the government's first look each month at consumer spending, which drives about 70 percent of U.S. economic activity.

Core retail sales, which exclude the volatile categories of gas, autos and building supply stores, rose 0.4 percent in February compared with January.

Economists were encouraged by the stronger-than-expected gain in retail sales. Some said the increase means the economy may be growing faster in the January-March quarter than they had forecast.

"This all suggests that the hit to spending from the payroll tax . . . and higher gasoline prices . . . hasn't been too bad," said Paul Dales, senior U.S. economist at Capital Economics. "The recent pickup in both employment and earnings growth bodes well for consumption growth later in the year, too."

The U.S. economy added 236,000 jobs in February, driving the unemployment rate down to 7.7 percent, its lowest level in more than four years. The gains signaled that companies are confident enough in the economy to intensify hiring even in the face of tax increases and government spending cuts. -- AP