U.S. retail sales rose modestly in March as auto sales plunged and consumers stretched to pay for pricey gasoline, but upward revisions to the prior months' data pointed to fairly solid first-quarter spending.

Total retail sales increased 0.4 percent, the smallest gain in nine months, the Commerce Department said on Wednesday, after rising 1.1 percent in February.

Although March's rise was a touch below economists' expectations for a 0.5 percent gain, the government raised February and January figures, taking the sting out the report.

Sizable upward revisions to the data in January and February suggest that real personal consumption expenditure in the first quarter will not decelerate as much as feared, said Michelle Girard, an economist at RBS in Stamford, Connecticut.

Receipts at gasoline stations, which accounted for about 10.7 percent of overall retail sales last month, increased 2.6 percent after rising 2.4 percent in February. Excluding gasoline, retail sales were up a scant 0.1 percent in March after a 0.9 percent rise the prior month.

According to the Energy Information Administration, gasoline prices rose 35 cents to an average $3.62 a gallon in March and it warned on Tuesday that prices could increase to about $4 a gallon nationwide this summer.

U.S. stocks opened higher after JPMorgan Chase's earnings beat expectations and spurred bets that other banks' results will be strong. U.S. Treasury yields rose and the yield curve steepened, while the dollar rose against the yen.

Consumer spending, which accounts for 70 percent of U.S. economic activity, is expected to have slowed in the first quarter after growing at a brisk 4.0 percent annual rate in final three months of 2010.

Economists, who view the high gasoline prices as a speed-bump in the economic recovery, have cut their first-quarter growth forecasts. They expect growth to regain its momentum later this year as improving labor market conditions boost incomes.

Expectations of slower growth pace were reinforced by a second report from the Commerce Department showing business inventories rose 0.5 percent in February after advancing 1.0 percent in January. The gain was less than economists' expectations for a 0.8 percent rise.

Inventories are a key component of gross domestic product changes and February's smaller-than-expected gain could prompt economists to further lower their first-quarter GDP estimates.

Businesses sharply scaled back on restocking in the fourth quarter of 2010, resulting in inventories slicing 3.4 percentage points off GDP growth during the period. Economists expect a reversal in the first quarter.

In the sales report, sales excluding autos rose 0.8 percent last month after increasing 1.1 percent in February, a touch above economists' expectations for a 0.7 percent increase. Auto sales fell 1.7 percent.

Clothing store receipts rose 0.6 percent last month, while sales at building materials and garden equipment suppliers increased 2.2 percent.

So-called core retail sales -- which exclude autos, gasoline and building materials - rose 0.4 percent after a 1.1 percent gain in February.

Core sales correspond most closely with the consumer spending component of the government's gross domestic product report. Receipts at sporting goods, hobby, book and music stores edged up 0.1 percent.

(Editing by Andrea Ricci)