Lower gasoline prices continue to tug down on retail sales. And consumers are not yet putting higher discretionary income into spending on non-gasoline categories of retail sales even as confidence has improved.

Retail sales in January fell 0.8 percent after declining an unrevised 0.9 percent in December. Excluding autos, sales decreased 0.9 percent-the same pace of decline as in December. Auto sales declined 0.5 percent after a drop of 0.8 percent in December.

Excluding both autos and gasoline sales rose 0.2 percent after no change in December. Expectations were for a 0.4 percent increase. Gasoline sales dropped a monthly 9.3 percent after dropping 7.4 percent in December.

There were some positives in the report. Gains were seen in building materials & garden supplies, electronics, miscellaneous store retailers, nonstore retailers, and food services & drinking places. Housing may be improving as builders go to these retailers for materials. But an alternative explanation is that the building material sales reflected purchases of sand and other items to deal with extreme weather. The other gains are positive as they are very discretionary-indicating an improved consumer sector.

The latest retail sales numbers are not consistent with increased discretionary income and higher confidence. One explanation may be that consumers are spending more on services than on "hard" items found in the retail sales report. The big picture is that the consumer sector is improved but the next broad data will be in the next GDP and personal income reports.