US retail sales rose more than twice as much as expected in May, while import prices surged, adding to recent data suggesting the US economy is recovering strongly after a slowdown in the first quarter.
Sales by US retailers rose 1.4 per cent in May as consumers shrugged off higher petrol prices and increased their spending on cars, clothing and building materials, a Commerce Department report showed.
Import prices, which are monitored closely by Federal Reserve policy-makers as a potential source of inflation, rose for the fourth straight month on higher petroleum costs.
The dollar initially rallied and US Treasury bond prices fell, as the data helped further cement a view that the Federal Reserve is unlikely to cut interest rates this year and may even raise them at some point to help cool inflation.
"The economy is coming back stronger than anybody could imagine," said Mark Vitner, economist at Wachovia Securities in Charlotte, North Carolina. "We were probably one of the most optimistic groups on the street, and the economy is surpassing even our expectations."
The increase in retail sales was the biggest since January 2006 and was far stronger than the 0.6 per cent increase predicted by Wall Street economists in a Reuters poll. April sales were revised to a 0.1 per cent fall from a 0.2 percent decline. Excluding vehicles, which account for 20 per cent of total retail business, sales rose 1.3 percent following a 0.1 per cent April rise.
Analysts had expected a 0.7 per cent increase excluding motor vehicles and parts sales. Sales at petrol stations rose 3.8 per cent in their strongest monthly increase since April 2006, but excluding gasoline, retail sales still rose a healthy 1.2 per cent. US import prices rose 0.9 per cent in May, according to a Labor Department report.
Wall Street economists were expecting a 0.3 per cent gain in import prices following an upwardly revised 1.4 per cent increase in April. Imported petroleum prices climbed 2.7 percent in May, the fourth straight monthly gain, after a bigger 6.6 per cent rise in April. But the department said that while oil prices were up over the last several months, they were down 4.6 per cent over the past twelve months.