WRAPUP 6-U.S. retail sales, industrial output rise firmly

* Retail sales rise for seventh straight month

* Industrial output extends recent gains

* Consumer sentiment edges up in early May

* Sturdy recovery contrasts with market turbulence

(Updates with closing market action)

By Lucia Mutikani and Pedro Nicolaci da Costa

WASHINGTON, May 14 (BestGrowthStock) – U.S. retail sales rose and
industrial production powered ahead in April, further evidence
the economic recovery was strengthening and broadening out.

Consumers were also a bit more confident early this month,
adding to Friday’s string of upbeat data that stood in sharp
contrast to financial markets which sold off as panicky
investors worried about Europe’s debts.

Though the debt crisis is expected to have a minimal impact
on U.S. economic activity, analysts worry falling share prices
could dampen consumer morale and crimp household spending.

“While the economic recovery is on a very sound footing, I
am apprehensive about some of the noise coming out of Europe,”
said Craig Thomas, a senior economist at PNC Financial Services
in Pittsburgh.

Sales at U.S. retailers climbed 0.4 percent after rising
2.1 percent in March, the Commerce Department said. April’s
increase was double what markets had expected and marked the
seventh straight monthly gain.

Separately, the Federal Reserve said industrial production
rose 0.8 percent last month after a 0.2 percent increase in
March. The gain exceeded market expectations for a 0.6 percent
increase and highlighted the factory sector’s lead role in the
economy’s recovery from the worst recession since the 1930s.

Capacity utilization, a closely watched measure of how
fully the economy is using its productive potential, rose to
73.7 percent, the highest since November 2008, from 73.1
percent in March.

The U.S. central bank has listed resource use among factors
it is monitoring to determine when to begin raising benchmark
interest rates, which stand effectively at zero.

Chicago Federal Reserve President Charles Evans said
uncertainty triggered by the Greek debt crisis underscored the
need to keep U.S. interest rates low for an extended period.

“I think that the risks, obviously, with the global
situation make things a little bit more uncertain than we were
expecting,” he said. “So, if anything, I am even more
comfortable with my assessment that accommodation continues to
be important.” [ID:nN14176733]


A rebuilding of inventories from record low levels by
businesses has largely driven the recovery, but consumers are
now taking part and growing more optimistic.

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. [ID:nN14149152]

“Robust production and restocking will spill over to the
broader economy via the labor market, household and business
sentiment. This dynamic will help sustain growth,” said Aaron
Smith, a senior economist at Moody’s Economy.com.

U.S. markets largely ignored the data, focusing on worries
that heavy government debt burdens in Europe could curb growth
in the region. The U.S. Standard & Poor’s 500 index (.SPX: )
dropped just over 2 percent during the session, but trimmed
losses to end down 1.88 percent at 1,135.68.

Prices for U.S. government debt rallied, while the dollar
raced to an 18-month high against the troubled euro.

Recent data have pointed to a fairly solid foundation for
the U.S. recovery, although an expected slowdown in Europe may
prove a headwind.

A Philadelphia Federal Reserve Bank survey of forecasters
published on Friday forecast the economy growing at a 3.3
percent rate in both the second and third quarters, up from an
earlier poll. [ID:nNLLEGE63G]

The economy grew 3.2 percent in the first quarter and
analysts expect a modest upward revision as export and retail
sales growth in March were stronger than previously estimated.

Sales last month were supported by a surprise rise in motor
vehicle purchases, as well as an increase in building materials
and garden equipment receipts. Excluding autos, sales rose 0.4
percent last month after rising 1.2 percent in March.

However, a measure corresponding most closely with the
consumer spending component of the government’s gross domestic
product report — a gauge that strips out autos, gasoline and
building materials — slipped 0.2 percent. It had risen 0.7
percent in March.

Analysts remain upbeat on the prospects for spending.

“The fact that the economy now appears to be creating jobs
at a healthy clip has improved the outlook for consumer
spending,” said Paul Dales, a U.S. economist at Capital
Economics in Toronto.

But businesses have some worries. Department store operator
J.C. Penney Co Inc (JCP.N: ) gave a modest profit forecast for
both the second quarter and the full year, and the chief
executive said spending remained tentative. [ID:nN14163914]

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. [ID:nN14152477]


Graphic showing U.S. retail sales and consumer sentiment


Graphic showing U.S. industrial production and capacity




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(Additional reporting by Ann Saphir in Bloomington,
Illinois, Editing by Andrew Hay)

WRAPUP 6-U.S. retail sales, industrial output rise firmly