Retail sales data suggest economy is on track

U.S. retail sales in May rose at the strongest pace since January 2006, while import prices surged, adding to recent data suggesting the U.S. economy is recovering strongly from a first-quarter slowdown.

Sales by U.S. retailers rose 1.4%, more than twice as much as expected, as consumers shrugged off higher gasoline prices and a housing slump to spend more on cars, clothing, building materials and electronics, a Commerce Department report showed Wednesday.

Businesses also ramped up inventories at a faster-than-expected 0.4% pace in April, the department said in a report that suggested further restocking would boost second-quarter gross domestic product growth.

Import prices, which are monitored closely by the Federal Reserve as a potential source of inflation, rose in May for the fourth straight month on higher petroleum costs, the Labor Department reported.

“The economy is coming back stronger than anybody could imagine,” said Mark Vitner at Wachovia Securities.

The data help further cement market views that the Federal Reserve is unlikely to cut interest rates this year.

A Fed report on Wednesday also showed that economic activity expanded from mid-April to May, with several Fed districts reporting stronger growth.

Although seven of the 12 Fed districts described growth as modest or moderate, others reported growth as “moderately strong,” “edging up” or “somewhat faster” than in recent months, according to the U.S. central bank’s “beige book” summary of anecdotal conditions.