(RTTNews) - Retail sales unexpectedly increased in the month of January, according to a report released by the Commerce Department on Thursday, although the sales growth was likely the result of significant discounts by retailers following the weak holiday shopping season.

The report showed that retail sales rose 1.0 percent in January following a revised 3.0 percent decrease in December. The increase, which came following six consecutive monthly declines, was a surprise to economists, who had expected sales to fall by 0.8 percent.

Peter Boockvar, equity strategist at Miller Tabak said, “Considering the weakness seen in the economy, the data is somewhat suspect, but we have been seeing massive discounting and that likely drove sales.”

Noting that January is historically a clearance month, Boockvar said that the main question is at what margin did the sales take place?

The unexpected increase in sales in January was partly due to a 1.6 percent increase in sales by motor vehicle and parts dealers, which followed a 2.0 percent decrease in December.

“This is in stark contrast to reports that auto sales continue to trend down throughout the month, with some of the biggest automakers posting more than a 40 percent drop in sales,” noted Lindsey Piegza, an economic analyst at FTN Financial.

Excluding the increase in auto sales, retail sales still increased by 0.9 percent in January compared to a 3.2 percent decrease in the previous month. The increase surprised economists, who had expected ex-auto sales to fall 0.4 percent.

The ex-auto sales growth reflected higher sales by electronics and appliance stores, food and beverage stores, and clothing and accessories stores. Gas stations also reported a notable increase in sales, as gasoline prices have been ticking back to the upside.

Nonetheless, while retail sales unexpectedly increased in January, the drop in sales in December was revised from the originally reported 2.7 percent decrease. Commerzbank economist Bernd Weidensteiner noted that the revision indicates slight further downside for fourth quarter GDP.

The downward revision to December retail sales is the latest in a recent string of data pointing to a downward revision to fourth quarter GDP.

On Wednesday, a Commerce Department report showed that the U.S. trade deficit narrowed to $39.9 billion in December from a revised $41.6 billion in November. The decrease in the size of deficit resulted in the smallest trade deficit since February of 2003.

However, economists had expected the deficit to narrow to $35.5 billion from the $40.4 billion originally reported for the previous month.

Boockvar of Miller Tabak said, “The higher than forecasted deficit will likely lead to a revision downward to fourth quarter GDP, especially on the heels of yesterday’s bigger than expected drop in wholesale inventories.”

The Commerce Department’s report on wholesale trade showed that inventories fell by 1.4 percent in December following a revised 0.9 percent decrease in November. Economists had expected inventories to fall by 0.7 percent.

Noting that wholesale inventories make up 25 percent of total business inventories, Boockvar said that a bigger than expected drop in business inventories would result in a reduction to the initial fourth quarter GDP estimate.

The Commerce Department is scheduled to release its report on business inventories in the month of December at 10 am ET today. Economists expect business inventories to decrease by about 0.9 percent following a 0.7 percent decrease in November.

“It was an unexpected build in inventories which contributed to the upside surprise to fourth quarter GDP,” Boockvar noted.

In late January, the Commerce Department’s advance fourth quarter GDP report showed that GDP fell by 3.8 percent compared to economist estimates of a decrease of 5.5 percent.

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Posted in Categories: Economy, Forex, Releases, USA.

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