Sales at U.S. retailers probably climbed in January as Americans bought more new cars and shoppers took advantage of post-holiday promotions, a sign that the U.S. economy is recovering, economists said before a report this week.

The projected 0.7 percent gain in purchases would follow a 0.1 percent increase in December, according to the median forecast of economists survey by Thomson Reuters.

Retail purchases excluding automobiles may have rose 0.5 percent in January, after falling 0.2 percent in the prior month.

Looks like the new year started off with a bang, said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. Consumers are coming back inspired by stronger job growth and somewhat improved finances.

The Labor Department's latest snapshot of the job market showed employers have been hiring more in recent months, with 243,000 net new jobs added in January. The unemployment rate now stands at 8.3 percent, down from 8.5 percent a month earlier and from 9.1 percent as recently as last August. Initial jobless claims are now below the 400,000 threshold for 12 out of the last 14 weeks.

The Commerce Department will report the retail sales data at 8:30 a.m. in Washington. Economists' estimates ranged from gains of 0.3 percent to 2.0 percent.

Strong Auto Sales

We've been seeing strength in the automotive sector for a while, but it really took off in January, said Michael Brown, an economist at Wells Fargo Securities LLC in Charlotte. Indications are, it's probably going to stay that way for a little while, which is good news for consumer spending.

Brown is forecasting a very strong increase of 1.1 percent for the month, above the consensus figure of 0.7 percent.

In January, purchases of light trucks and cars continued their upward surge, rising 11 percent over a year ago to 913,287, according to Autodata Corp. The annualized sales pace in January was 14.18 million vehicles, the highest sales rate for the industry since August 2009, when the U.S. government was running the cash for clunkers trade-in incentive program.

Chrysler, now managed by Italy's Fiat SpA, posted a 44 percent rise in U.S. auto sales in January, led by surge in demand for its revamped 200 and 300 sedans. Volkswagen's namesake brand sold 27,209 cars and sport-utility vehicles, up 48 percent. That was the VW brand's best January sales performance since 1974, when the original Beetle was a favorite of American drivers.

Same-Store Sales

Several major U.S. retailers reported upbeat January sales at stores open at least a year as the appetite for merchandise with discounts increased.

We've seen some fairly strong retail sales numbers coming in across the board, Brown said.

The 20 retailers tracked by Thomson Reuters together showed 4.2 percent growth in same-store sales for January.

Sales at Limited Brands Inc. (NYSE:LTD), the operator of the Victoria's Secret lingerie chain, climbed nine percent. Target Corp. (NYSE:TGT), the second-largest U.S. discount retailer, posted a 4.3 percent increase in same- store sales. Although Macy's Inc.'s (NYSE:M) same-store sales rose 2.4 percent, when 3.5 percent was expected, the department store raised its earnings guidance for the year.

Consumer Confidence

Despite all the good news, consumer confidence in January fell unexpectedly after two straight months of big gains.

The confidence numbers are closely watched by economists because consumer spending accounts for about 70 percent of U.S. economic activity.

Some economists are concerned Americans are becoming more worried about their incomes and rising gas prices.

If they see their spending power decline, they are likely more hesitant to spend for the month, said Kim Fraser, an economist with BBVA Compass bank of Birmingham, Ala. Fraser expects retail sales to increase 0.6 percent.

Most of it is related to inflationary pressures, said Fraser. Gas prices increased in January and we expect that should really lift the nominal value of gasoline sales.

Although economic activity will somewhat slow in the first quarter, Fraser added that doesn't necessarily mean things are going downhill fast.

In general, we do see an increasing trend in retail sales growth for the next few months, Fraser said.