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A sigh of surprised relief came to the American economy, as retail sales rose in the U.S., battling the perception that the economy has already entered a recession.

Leading the way for the 0.3 retail sales increase were clothing, autos and gasoline, according to the Commerce Department.

"Today's report will diminish recession anxieties, but it doesn't dispel them altogether," said Richard DeKaser, chief economist at National City Corp.

This helps reinforce Federal Reserve Bank of St. Louis President William Poole's comment on February 11, that it's more than likely the U.S. will avoid a recession.

Even so, it's expected there will need to be an ongoing drop in interests rates to keep the economy growing, as the possibility that consumers will slow down their spending even more increases.

Overall sales in department stores declined by 1.1 percent in January, said the report, with most consumer goods declining in sales, along with building materials. When including general merchandise stores, there was a small 0.1 percent increase. Clothing sales increased by 1.4 percent during the same month.

Auto and auto parts sales were a major bright spot, as they rose 0.6 percent in January, after dropping by 1.1 percent in December.

General Motors (NYSE:GM) was the major recipient of the auto sales in the U.S., as car sales rose by 0.2 percent, and light-trucks had a healthy 4.3 percent increase in sales. Most other automakers fell in U.S. sales in January, including Ford (NYSE:F) and Chrysler.

After being flat in December, gasoline sales also increased in January by 2 percent, even though prices rose by close to 11 cents from December in the early part of January. Without gas, retail sales grow by 0.1 percent in the U.S. in January.

Economist surveyed by Bloomberg News had projected a drop of 0.3 percent in retail sales for January.