January Retail Sales Gain Hints at Start of Recovery : Recession: The increase was stronger than expected and the largest in eight months. But some say it might be temporary.

In an encouraging report that hints at a budding economic recovery, the government on Thursday said that retail sales in January rose 0.6%--a much stronger showing than expected and the largest increase in eight months.

Some economists, however, cautioned that the gains might represent a temporary rebound in consumer demand rather than the harbinger of a more vigorous recovery. The increase is also measured against the weak results of January, 1990, when the Persian Gulf War depressed sales at major retailers.

Still, many hailed the most recent retail sales results as signaling a possible reversal in sagging consumer confidence. Retail sales make up about half of consumer spending, which accounts for two-thirds of the nation’s economic activity.

“This shows signs of life in consumer spending,” said Allen Sinai, chief economist with the Boston Co. Economic Advisers. “The key to the turnaround may be stirring.”

In another promising report Thursday, the Labor Department said jobless claims recorded a second consecutive weekly decline, with 437,000 Americans making first-time visits to unemployment offices for the week ending Feb. 1.

The number of Americans filing initial claims for jobless benefits dropped by 13,000 from the previous week’s mark of 450,000, the Labor Department said.

The Commerce Department report on retail activity in January showed that sales rose to a seasonably adjusted $153.5 billion, up from a revised $152.7 billion in December, which proved to be a weak holiday shopping season. It was the biggest increase since sales jumped 1.2% last May.

Tracy Mullin, president of the National Retail Federation in Washington, said the retail report represents “a very hopeful sign of the future.”

She attributed the sales gains to a combination of lower interest rates, improving consumer confidence and efforts by President Bush and Congress to do something to stimulate the economy. Improvement in retail sales is essential to a recovery from the recession.

“Consumer confidence is really the key,” Mullin said. “Everything seems to be building toward an optimism about the economy.”

However, consumers continue to express deep worry about the economy. An ABC News/Money magazine poll released Thursday showed 93% of Americans view the economy’s prospects negatively.

Orange County has been hit harder by the recession than have other counties in Southern California, according to a new Cal State Fullerton study. In job losses alone, Orange County has seen 20,300 positions slashed from payrolls from July, 1990, through the end of 1991.

Still economists also took heart in the revised sales figures for December and November. Instead of declining 0.4% in December, as originally reported, sales actually edged up 0.1%. During November, sales remained unchanged instead of falling 0.5% in initial statistics.

The revisions boosted overall sales in 1991 by 0.8%, rather than the 0.7% increase reported last month. Still, it was the smallest yearly advance since sales were unchanged in 1961.

Some economists warned that the uptick in retail sales may falter if other economic conditions fail to improve.

Department stores reported the large gains, with sales moving up 2.1% after declining 1.6% in December. Building material and hardware store sales rose 5.4% on top of a 1.1% increase the previous month.

Sales of automobiles and other durable goods--products expected to last more than three years--advanced 0.5% following a 0.2% gain a month earlier.

Separately, auto makers Thursday reported that sales of North American-made cars and light trucks surged 22.7% during early February, offering some tentative hope that U.S. consumers are beginning to feel more confident about buying. But the news was tempered by Ford Motor Co.’s record $2.3-billion loss for 1991.

The January retail report said that sales of non-durable goods such as gasoline and groceries rose 0.6% after gaining 0.1% a month earlier.

There were also sales declines. Stores selling furniture, appliances and other home furnishings saw sales plunge 2.9%, wiping out a 1.5% gain in December. Purchases from apparel stores also fell 0.6%, continuing December’s 0.5% decline.

In Orange County, retailers reported mixed sales in January. Some said the recession continues unabated, while others see hopeful signs.

The Martin Lawrence Galleries, a fine-art chain with three stores in Orange County, had a double-digit sales increase in January, said Regional Director Diana Moore. Part of the reason was reduced-price sales, but she added that the gain also reflected a more optimistic attitude among consumers.

“The sale merchandise is certainly whetting their appetite and as a direct result, they are buying items that are on sale and not on sale,” Moore said. “They really are opening up their wallets and loosing up their purse strings at a big rate. It’s certainly surprising to us.”

At the upscale Garys & Co. menswear store in Fashion Island in Newport Beach, manager Steven Ramenofsky said that January sales were slightly better this year than last. The recession is not yet over, he said, but added that there are some encouraging signs. For one, some of the store’s regular customers, developers who saw their building plans stopped cold by the recession, were back shopping. “I’m hearing guys saying it’s getting better for them,” Ramenofsky said.

January sales did not improve over last year’s at the Charles Jourdan designer apparel shop at South Coast Plaza. Manager Valentin Siroon said that she has brought in more sale merchandise and that the store’s average prices are lower than last year’s. But customers are “holding real tight. They are just too worried to spend money.”

This week’s rainstorms, she added, have not helped matters.

The stock market hit new highs this week, but Thursday it suffered a setback as interest rates rose and hopes dimmed for new credit-easing steps by the Federal Reserve. The Dow Jones industrial average fell 30.18 points to 3,246.65.

Investors have been anticipating a new move by the Fed to lower interest rates. But Thursday’s positive reports on retail sales and unemployment claims may make the need for easing less pressing.

Sanchez reported from Los Angeles and Yaquinto from Washington. Staff writer Chris Woodyard in Orange County contributed to this story.