US December retail sales data

-0.1% from November +4.1% from December 2000 +3.4% sales growth for full-year 2001, against +7.6% in 2000

The figure was up 4.1% on the same period last year.

Retail sales figures are a key indicator of overall economic well-being in the US, where consumer spending accounts for about two thirds of economic activity.

The retail sector's better-than-expected performance lifted the mood on Wall Street, where the Dow Jones index of leading US shares ended a six-day slump by closing 0.34% higher at 9,924.29

Stock prices have been under severe pressure since Friday, when Federal Reserve Chairman Alan Greenspan warned that the US economy still faces "significant risks."

Some analysts believe that the Tuesday's retail figures should dispel some of the gloom.

"It's stronger than expected. Greenspan's comments suggest that the risks are weighted toward continued weakness, but these numbers raise questions about that conclusion," said Asha Bangalore, economist at Northern Trust.

Slowing growth

However, the Department of Commerce figures confirmed that while the US retail sector is in better than expected shape, it has not escaped the year-long economic downturn.

Retail sales rose just 3.4% during 2001, less than half the 7.6% increase recorded in 2000, the Department of Commerce said.

This has led some analysts to take a more pessimistic view.

"All the weakness is real. The momentum is going downward going into 2002," said Elisabeth Stoegmueller, economist at Dresdner Kleinwort Benson.

Year-long slowdown

The US economy began to slow in late 2000, and entered recession in March last year, according to economists.

The US Federal Reserve has propped up consumer spending through aggressive interest rate cuts, but there is as yet no firm sign of a corporate recovery.

Many US officials now fear that a sharp rise in unemployment will dent consumer spending, currently the main driver of growth, if the business climate does not improve.

The Federal Reserve is due to make its next interest rate decision on 30 January.

November slump

Further positive signals came on Tuesday from two separate reports suggesting that sales rose last week compared with the same period last year.

Market monitors Instinet Research said sales for the week to 12 January climbed 1.9% on the year, while a weekly retail report from Bank of Mitsubishi-Tokyo and UBS Warburg put the increase at 2.3%.

These reports, together with the Department of Commerce figures, have helped to offset the impact of a shock 3% plunge in retail sales in November.

Economists attributed the sharp decline in November to the expiry of one-off discount deals designed to lure shoppers back to the malls in wake of the 11 September attacks.

Analysts said the dip in December 2001 retail sales was due chiefly to a drop in petrol prices, in line with a fall in world crude oil prices.