U.S. economic data released today points to further weakening in the housing market and decreased consumer spending.

U.S. retailers reported weak January sales today. Major chains such as Wal Mart and Nordstrom’s were among the 43 retailers tallied.

Most saw grim results. It was the weakest January increase counted in four decades.

Wal-Mart reported a 0.5% gain in sales at stores open at least a year. Analysts had forecasted a 2% increase in same-store sales.

According to the UBS-International Council of Shopping Centers, sales rose a weak 0.5% in January, below the 1.5% forecast. December’s miserable holiday season growth rate was 0.7%.

Last year’s same-store sales average gain was 2.1%.

The paltry retail sales figures are further evidence that consumer demand is decreasing in the face of struggling housing market, a weakening job situation and the continuing credit crisis.

Meanwhile, the pending home sales index (PHSI), which measures home sales that have been signed, but not finalized, was released today.

Pending home sales fell 1.5% in December and were downwardly revised to show a 3.0% decrease in November, according to the National Association of Realtors (NAR).

The index is now at 85.9, which is a 24.2% decline from December 2006.

Lawrence Yun, NAR chief economist, said sales activity is expected to remain soft through the first half of the year despite a generational low in mortgage interest rates.

“Areas with a high prevalence of subprime lending will continue to feel downward price pressure,” said Yun. “Where builders have cut construction sharply, and in most areas with improving affordability conditions, we’ll generally see moderately higher home prices.”

“Consumers in the U.S. are being hit from every direction with weak labour markets, tight credit conditions, the disappearance of the housing wealth effect and high energy prices,” wrote Charmaine Buskas, seniro economist at TD Securities, in a note. “Reports such as these do not bode well for January retail sales when it is released on February 13,”