US retail sales surge as economy stabalises

Federal Reserve Chairman Ben Bernanke also gave a fairly upbeat view of the US economy,saying the longest and deepest recession since the 1930s was likely over.

8220;Even though from a technical perspective the recession is very likely over at this point,it8217;s still going to feel like a very weak economy for some time,8221; Federal Reserve Chairman Ben Bernanke said at a Brookings Institution conference in Washington.

The Commerce Department said retail sales climbed 2.7 per cent after declining 0.2 per cent in July. It was the biggest monthly advance since January 2006 and well above expectations on Wall Street for a 2 per cent gain.

8220;Retail sales show the recovery is here. This wasn8217;t just autos,it wasn8217;t just gasoline. This was the US consumer getting out of their foxhole,8221; said T.J. Marta,market strategist at Marta on the Markets in Scotch Plains,New Jersey. 8220;This is indisputably a good number.8221;

The strong data pushed US government bonds prices lower and pulled benchmark yields from two-month lows. US stocks touched fresh 2009 highs,with the Standard amp; Poor8217;s 500 index posting its highest close since October.

President Barack Obama,speaking at a General Motors assembly plant in Ohio,said measures undertaken by his administration to rescue the economy 8212; including a 787 billion stimulus package 8212; were working,but warned: 8220;It8217;s going to take some time to achieve a complete recovery.8221;

Economists are generally in agreement that the US economy is in the early phase of recovery from the worst recession in seven decades. But many remain worried about lackluster consumer demand,with rising unemployment decimating incomes.

The Fed will consider the data at a meeting next week at which officials will resume debate on how best to withdraw the extraordinary support they are providing the economy. One official has already questioned whether the central bank should move ahead with everything it has already planned.

QUICK RECOVERY EYED

Retail sales were bolstered by the government8217;s 8220;cash for clunkers8221; program,which gave consumers cash to swap aging gas-guzzling cars for new,more fuel-efficient models.

Motor vehicle and parts sales surged 10.6 per cent last month,the biggest rise since October 2001. Rising gasoline prices also added to the increase in overall retail sales.

The report,however,showed strength across most sectors,with the exception of furniture and building materials,evidence that household spending was likely on the mend.

Consumer spending normally accounts for about 70 per cent of US economic activity,with retail sales making up a third of that. Excluding motor vehicles and parts,sales jumped 1.1 per cent in August after falling 0.5 per cent in July.