WASHINGTON — Retail sales in January increased at apparel, general merchandise and department stores, as retailers cleared holiday merchandise, consumers cashed in gift cards and discounting bolstered business.

Sales at apparel and accessories stores, which fell in December, bounced back in January and rose a seasonally adjusted 1.8 percent to $16.2 billion, while sales at general merchandise stores went up 0.9 percent to $43.5 billion and sales at department stores inched higher by 0.3 percent to $18.03 billion, according to the Commerce Department’s retail sales report released Tuesday.

In the overall economy, retail sales fell 0.3 percent last month after a jump of 1.1 percent in December, as car sales plummeted and offset gains in apparel.

“One of the things that happened in January is a lot of holiday-focused retailers” got a boost from gift cards, said Carl Steidtmann, chief economist at Deloitte Research. “When people spend [gift card money], it is not quite as price sensitive because it is not their own money, so what you are seeing this year and will see in years to come are better margin results in January.”

Steidtmann said department store sales, which have been in a long-term deflationary pattern, “seem to have stabilized and turned around.

“Consumers are in a good position to spend,” he said. “We are beginning to see job growth, interest rates are low and there is still a lot of mortgage refinancing money.”

Steve Spiwak, senior economist at Retail Forward, attributed the increases to a number of factors, including gift cards, an uptick in the stock market, strong demand and a multibillion-dollar dividend given stockholders by Microsoft in December.

“Microsoft played a big role in last month’s sales performance,” Spiwak said. “Microsoft paid out a huge dividend that nearly matched the tax rebates of 2001, and that provided a big stimulus and drove high-end sales.”

Spiwak said the Microsoft dividend helped lead to the biggest increase ever in personal income in December on a monthly basis.

“There were a lot of strong tailwinds heading into January,” he said, adding that retailers such as American Eagle Outfitters, Talbot’s and Abercrombie & Fitch all posted double-digit sales increases in January, which bolstered overall apparel retail sales.

This story first appeared in the February 16, 2005 issue of WWD. Subscribe Today.