WRAPUP 4-US retail sales up, economic recovery seen widening

* Retail sales rise strongly, autos give a boost

* Sales ex-autos up 0.6 pct, core sales rise 0.5 pct

* Business inventories highest in seven months

* Consumer inflation muted, supports low interest rates

(Adds details, fresh Bernanke quotes)

By Lucia Mutikani

WASHINGTON, April 14 (BestGrowthStock) – Sales at U.S. retailers
rose more vigorously than expected in March as stronger demand
led businesses to rebuild inventories to a seven-month high in
February, suggesting a broadening economic recovery.

The retail sales report on Wednesday painted a picture of
consumer defiance in the face of high unemployment and tight
access to credit. It offered hope the manufacturing-led
recovery would continue when the boost from government stimulus
and the rebuilding of inventories ebbs.

“Self-sustained recovery are the key words we are all
looking for right now and today’s retail sales report is a step
in that direction,” said Robert Dye, a senior economist at PNC
Financial in Pittsburgh.

U.S. Federal Reserve Chairman Ben Bernanke later told
Congress he too thought domestic demand was moving onto firmer
footing though he cautioned the recovery was only a moderately
paced one.

Total retail sales jumped 1.6 percent, the largest increase
since November as consumers stepped up purchases of vehicles
and a wide range of goods, the Commerce Department said.
January sales were revised up to a 0.5 percent rise from 0.3
percent.

The data provided a fresh catalyst for stock bulls to push
the S&P 500 index up through a critical level of 1,200,
extending the benchmark index’s gain since the March 2009
bottom to 77 percent.

Consumer discretionary stocks, which include retailers and
other consumer-oriented companies, were among top gainers.

U.S. government debt prices were marginally lower.

With domestic demand strengthening, businesses have
restarted to rebuild inventories from record low levels.
Business inventories increased 0.5 percent in February, the
largest advance since July 2008, to their highest level in
seven months, the Commerce Department said in a second report.

Bernanke said demand was picking up, but he still viewed
the recovery from the worst downturn since the Great Depression
as moderate. He reiterated the U.S. central bank’s commitment
to very low interest rates.

“There is a pretty broad view that we are seeing some
building momentum in final demand. Consumer spending looks to
be picking up,” Bernanke told the Joint Economic Committee of
Congress on Wednesday.

“It looks like we are on a path to moderate recovery and
that risk of a double-dip, while certainly not negligible, is
certainly less than what it was a few months ago.”

The dollar fell after Bernanke gave no new guidance on U.S.
interest rates.

A separate report from the Labor Department showed no signs
of inflation pressures, which should help the U.S. central bank
honor its pledge to keep its benchmark interest rate unusually
low for an extended period.

MUTED INFLATION

Consumer prices rose 0.1 percent last month after being
flat in February. Excluding volatile food and energy prices,
core inflation was unchanged in March after rising 0.1 percent
the prior month.

Growing confidence in the recovery, particularly
brightening prospects in the job market, is encouraging
households to tap into their savings to fund purchases of
goods, including luxury items.

Retail sales in March were buoyed by a 6.7 percent rebound
in motor vehicle and parts purchases. Excluding motor vehicles
and parts, retail sales rose 0.6 percent in March after rising
1.0 percent the prior month as a combination of an early Easter
holiday and warm weather boosted receipts at clothing stores.

“This surge in spending reflects a decline in the saving
rate rather than a surge in income,” said Nigel Gault, chief
U.S. economist at IHS Global Insight in Lexington,
Massachusetts.

“Consumers will need income support to sustain the
expansion, but with the labor market beginning to turn upwards,
help is on the way.”

Core retail sales, which correspond most closely with the
consumer spending component of the government’s gross domestic
product report, rose 0.5 percent after increasing 1.2 percent
February. Analysts said this bode well for first-quarter gross
domestic product growth.

“This implies a strong 4 percent gain in real consumer
spending in the first quarter and leaves GDP tracking close to
4.5 percent in the first quarter,” said Michelle Meyer, an
economist at Barclays Capital in New York.

Consumer spending, which normally accounts for about 70
percent of U.S. economic activity, increased at a 1.6 percent
annual rate in the fourth quarter. The economy expanded at a
5.6 percent rate in the last three months of 2009.

Retailers reported growth in sales across a broad spectrum
of categories, with the exception of gasoline stations and
electronics and appliances stores.

Clothing and clothing accessories sales increased 2.3
percent, while building materials and garden equipment climbed
3.1 percent – the largest advance since November 2007. Receipts
at sporting goods, hobby and book stores rose 1.0 percent.

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US retail sales: http://link.reuters.com/bag77j

US CPI graphic: http://link.reuters.com/gag77j

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Stock Market Advice

(Additional reporting by Emily Kaiser)

WRAPUP 4-US retail sales up, economic recovery seen widening