US retail sales rise as consumers shrug off stock price drop

WASHINGTON (AP) — U.S. retail sales rose modestly in January, evidence that Americans kept shopping despite sharp drops in stock prices.

A key question for the economy this year is whether consumer spending can keep growing and offset the impacts of stock market volatility and slowing growth overseas.

Yet retail sales account for only about one-third of all spending, with services such as haircuts and Internet access making up the other two-thirds.

Cheap gas is dragging down the overall retail sales figures, which include gas but don't account for price changes.

On Wednesday, the National Retail Federation forecast above average sales this year, citing better hiring and wage increases, as well as lower gas prices.

The widening gap between online and traditional retailers will be on display next week with major stores like Wal-Mart, Target and J.C. Penney putting up their numbers from the fourth quarter, which includes the crucial holiday shopping period.