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Housing remains main drag on economic recovery

WASHINGTON — American businesses and consumers are giving the economy a boost by spending more, but the troubled housing market remains an obstacle, new data show.

Businesses increased their stockpiles in every month last year, a sign that companies expect sales to remain healthy.

Still, the view of the housing market among home builders hasn't changed in four months, suggesting weak home sales will drag on the economy throughout the year.

Consumers bought more from retailers for a seventh straight month in January. The gains came despite snowstorms that limited spending from workers with more money in their paychecks from a Social Security tax cut.

Retail sales rose 0.3 percent last month to $318.6 billion, the Commerce Department said Tuesday. Sales have risen more than 14 percent from the recession low in December 2008, although January's number fell short of analysts' expectations.

People spent more at department stores and on electronics while also paying higher prices for gas. Online sales increased at a healthy pace.

Part of the overall retail sales gain last month reflected higher gasoline prices. Sales at gasoline service stations climbed 1.4 percent. Excluding the rise at gas stations, retail sales would have risen 0.2 percent last month.

Businesses appear to expect consumers will keep spending. Companies added to their stockpiles for a 12th consecutive month in December, the Commerce Department said. That suggests further growth at U.S. factories that could lead to more hiring in the months ahead.

Inventories rose 0.8 percent in December, and a full year of increases pushed the value of businesses' stockpiles to $1.44 trillion in December. That's a level that economists consider healthy.

Economists think inventories will keep rising as long as sales remain strong and businesses have confidence that the demand will continue. That should boost demand at U.S. factories, and ultimately lead to more jobs.

But those jobs are unlikely to come from home builders, who remain pessimistic after the worst year for new home sales in nearly a half-century.

The National Association of Home Builders said Tuesday that its index of builder sentiment remained unchanged in February for the fourth straight month at 16.

Any reading below 50 indicates negative sentiment about the market. The index hasn't been above that level since April 2006.

Also Tuesday, the Federal Reserve Bank of New York released data showing Americans are making substantial progress ridding themselves of debt. Compared to the summer of 2008, when consumer debt peaked, there is now 7 percent less mortgage debt, 12 percent less in auto loans, and 15 percent less credit card debt outstanding. Loan payments last year were at their lowest level in a decade.

Housing remains main drag on economic recovery 02/15/11 [Last modified: Tuesday, February 15, 2011 10:02pm]

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