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Retail sales bounce back

Consumer activity rises 1.2% in May

WASHINGTON -- The appetite of America's shoppers returned in May, boosting sales at the nation's retailers by 1.2 percent, a fresh sign the economic recovery is on solid footing.

The latest snapshot of retail activity reported by the Commerce Department yesterday comes after a consumer pullback in April, which depressed retail sales by 0.6 percent. May's increase was slightly larger than the 1 percent rise that some economists were predicting and marked the biggest gain since March.

In a second report from the department, the US trade deficit swelled to a record $48.3 billion in April, reflecting demand for foreign-made goods, especially cars, TVs, furniture, and clothes.

April's deficit was 3.8 percent larger than in March, which had been the previous record monthly high. The rebounding US economy has been supporting demand for imported goods.

Imports of goods and services rose by 0.2 percent in April to a record $142.3 billion. Exports, meanwhile, dropped by 1.5 percent to $93.9 billion, which nonetheless marked the second-highest level on record.

Higher imported crude oil prices also contributed to the trade deficit in April. The average price of imported crude oil rose to $31 a barrel, the highest since February 1983.

On Wall Street, though, inflation fears sent stocks lower. The Dow Jones industrials lost 75.37 points to close at 10,334.73.

In the retail sales report, sales at automobile dealerships increased by 2.7 percent in May, an improvement from the 2.1 percent decline in April and the biggest gain since November. Excluding sales at automobile dealerships, retail sales went up by a solid 0.7 percent in May.

''As the economy continues to pick up steam, retailers are reaping the benefits," said Rosalind Wells, chief economist at the National Retail Federation.

Sales at clothing stores, department stores, health and beauty shops, sporting goods, music and book stores, and grocery stores all increased in May. However, sales of furniture and building supplies posted declines. People also ate out less, causing sales at restaurants and bars to dip.

Consumers play an important role in determining the vigor of the economic recovery. That's because their spending accounts for roughly two-thirds of all economic activity in the United States.

Meanwhile, gasoline prices posted their first nationwide decline this year. The national average price fell by 6.5 cents to $2.04 per gallon on Friday, according to the Lundberg Survey of 8,000 gas stations released Sunday.

In May, sales at gasoline stations rose by 4 percent, the biggest rise since February 2003, reflecting higher prices at the pump. Still, even excluding the sale of gasoline, retail sales rose by a strong 0.9 percent in May.

''While high gasoline prices might be diverting some spending from other areas, the fact is that consumer demand remains strong overall," said Sherry Cooper, chief economist at BMO Nesbitt Burns.

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