The likelihood of another emergency cut in US interest rates decreased as new data showed that American retail sales had risen unexpectedly by 0.3 per cent in January.

However, economists said that the outlook for the economy in the United States remained poor and that a further rate cut, probably of 0.5 percentage points, was likely at the US Federal Reserve's next scheduled interest-rate meeting, on March 18.

Ethan Hawke, chief US economist at Lehman Brothers, the investment bank, said: “It's comforting to know that the consumer isn't collapsing, but is just weak. The big question at the moment is whether we are in a weak economy or a recession and this report suggests it is just a weak economy.

“This doesn't mean the Fed stops cutting, but it does take the wind out of the sails for an inter [emergency] cut.”

The Fed imposed an emergency cut of 0.75 percentage points in the cost of borrowing to 3.5 per cent on January 22, then reduced the rate by a further half-point at its scheduled meeting eight days later.

The 0.3 per cent rise in January's consumer spending compares with a consensus estimate of a 0.3 per cent fall and comes after a 0.4 per cent drop in December. It was fuelled by increased spending on cars, clothes and petrol, according to the US Commerce Department.

Petrol station sales rose by 2 per cent in January, while sales at clothing retailers increased by 1.4 per cent and revenue at groceries increased by 0.6per cent. Sales at car dealerships and parts stores rose by 0.6 per cent.

There were, however, plenty of signs that consumer spending was on the decline. Sales at department stores fell by 1.1 per cent, revenues at building suppliers declined by 1.7 per cent and furniture was down by 0.5 per cent.

Consumers, whose spending accounts for about two thirds of the economy, are in the midst of the worst housing decline for 25 years.

This has reduced their confidence to borrow money at the same time as the tightening credit crunch has made it harder for them to take on loans to finance big purchases.

Consumer confidence was hit further by the loss of 17,000 jobs in January, the first drop in more than four years.

America's poor economic outlook has caused problems for policymakers such as Ben Bernanke, the Fed Chairman, and and Henry Paulson, the Treasury Secretary.

Both will testify today before a Senate committee on banking, housing and urban affairs as part of a concerted political effort to address the difficulties in the mortgage market and the economy.

The economy was given a tentative boost by Coca-Cola, the world's largest soft-drinks maker, and Deere & Co, the world's largest maker of tractors and combine harvesters, which both posted quarterly profits that exceeded expectations.

Coca-Cola reported a 79 per cent rise in net income in the fourth quarter to $1.21billion (£610million), in part because of higher sales of the Glacéau division's “vitaminwater” in the US.

Deere & Co unveiled a 55 per cent rise in its first-quarter profit to $369.1million as increased demand from farmers across the world boosted sales of agricultural equipment.

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