US retail sales, industrial output rise firmly

Consumers also grew slightly more confident early this month, adding to the string of upbeat data on Friday that stood in sharp contrast to fragile conditions in financial markets, which were selling off heavily around the world as panicky investors worried about Europe’s debts.

Such turbulence had yet to affect U.S. economic activity though, with sales at U.S. retailers climbing 0.4 percent in April, a Commerce Department report showed, double the median forecast in a Reuters poll of economists and the seventh straight monthly gain.

Industrial production also forged ahead more strongly than expected in April. The 0.8 percent rise offered further evidence that parts of the economy are humming along despite persistently high unemployment.

“It looks like a very solid recovery,” said Bob Mellman, senior economist at JP Morgan in New York.

The Thomson Reuters/University of Michigan’s Surveys of Consumers’ sentiment index rose to 73.3 in May from 72.2 in April, a touch below market expectations for 73.5.

U.S. markets largely ignored the data and followed Europe’s lead lower. The S&P 500 was down 1.5 percent after the raft of data.

The pick up in consumer sentiment, coupled with a recovery in the labor market, bodes well for future retail sales, which showed some pockets of weakness in April.

Despite that and a modest fall in the measure that corresponds most closely with the consumer spending component of the government’s gross domestic product report, analysts remained upbeat on the outlook for spending.

“The decent gains in payroll employment in recent months have improved the outlook for spending,” said Paul Dales, a U.S. economist at Capital Economics in Toronto.

“It’s very early days yet, but it seems as though consumption growth in the second quarter could easily match the 3.6 percent annualized gain in the first.”

Core retail sales, which exclude autos, gasoline and building materials, fell 0.2 percent after increasing 0.7 percent in March.

Building materials and garden equipment receipts also may have overstated gains, climbing 6.9 percent, possibly in anticipation of the end of the government’s mortgage tax credit.

Strengthening domestic demand saw U.S. business inventories increase in March to their highest level in eight months, the Commerce Department said in a second report.

Inventories rose 0.4 percent to $1.33 trillion after increasing by an unrevised 0.5 percent in February.

Inventories are a key component of gross domestic product changes over the business cycle and rebuilding of stocks from record low levels is assisting the economic recovery. The inventory-to-sales-ratio, which measures how long it would take to clear shelves at the current sales pace, was at 1.24 months’ worth, the lowest since a matching level in January 2006, compared with 1.27 months’ worth in February.