U.S. consumers shrugged off rising gasoline prices and slumping home sales and stormed the malls in May, pushing retail sales up by the largest amount in 16 months.
The Commerce Department reported Wednesday that retail sales in the United States surged by 1.4 percent — double the increase that analysts had been expecting.
The spending spree was widespread, with auto dealers, department stores, specialty clothing stores and hardware stores enjoying an especially good month.
"When consumers are in a spending mood there's very little to constrain them. They will follow their instinct," said Kurt Barnard, president and chief economist at Barnard's Retail Forecasting Group.
Sales would have been strong even without last month's big jump in gasoline prices, which topped $3.20 per gallon. Excluding sales at gasoline stations, overall retail sales would still have been up 1.2 percent.
The strong showing caught analysts by surprise. They had been forecasting a more moderate rebound of 0.7 percent.
"Consumers are doing more smaller-ticket items, which could explain some of the jump," according to Dhruv Grewal, professor of marketing and retail at Babson College. "The money they would have used to buy a house is buying more TVs, for example."
The increase should ease fears that consumer spending, which accounts for two-thirds of the economy, could falter in coming months under the impact of the surge in gasoline prices, the slowdown in the housing market and recent increases in interest rates.
The government report painted a more optimistic picture of consumer spending than last week's report from the nation's big chain stores, which reported moderate gains in their survey of same-store sales after a dismal April. April sales were hurt by bad weather and the fact that Easter came early this year.
The 1.4 percent increase in May sales was the biggest one-month advance since a 3.3 percent surge in January 2006. It left sales at a seasonally adjusted annual rate of $377.9 billion in May.
Excluding automobiles that account for 20 percent of total retail business, sales rose 1.3 percent following a 0.1 percent April rise that was originally reported as flat.
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