New figures showed retail sales barely rose in March but this was entirely because of huge upward revisions to February's sales figures.
Sales grew 0.1 per cent last month after climbing 1.9 per cent in February - the biggest jump for nearly three years. Their average annualised growth rate during the first three months of this year has been well over 8 per cent.
Yet headline consumer price inflation dipped, falling to 2.8 per cent from 2.9 per cent in February despite big increases in food and energy prices. The price level rose 0.4 per cent, and the "core" index, excluding food and energy, increased 0.3 per cent.
March's jump in food prices was the highest for more than a year. Bad weather has driven up grain and vegetable prices. A Florida freeze hit tomatoes, storms affected lettuce crops in the South West and lack of rain in the Mid-West means stocks of corn and wheat have fallen perilously low.
Similarly, the harsh winter has depleted oil stocks and sent prices to their highest level since the gulf war.
The general level of food prices paid by consumers increased 0.6 per cent during March, with fresh vegetables up a dramatic 10 per cent during the month. Energy costs climbed 1.4 per cent.
"People have taken a relaxed view of these increases on the basis that they will be short-lived," said Mark Cliffe, an economist at securities firm HSBC Markets.
A Labor Department economist, Patrick Jackman, said: "I don't think it will get out of hand."
There were declines in some other prices, notably a 1.9 per cent drop in airline fares
The market reaction to the buoyant retail sales was more surprising in the light of Wall Street's recent dives on the slightest concern about future inflationary pressure.
A drop in the University of Michigan's consumer sentiment index between March and April contributed to yesterday's calm. The index fell to 90.8 from 93.7 last month.
Analysts said fears that the Federal Reserve would decide to raise key interest rates were receding. "The Fed would need more evidence of faster growth and an uptick in inflation before they act. My guess is that it will want to do nothing this year," said Brian Fabbri, an economist at Paribas Capital Markets on Wall Street.
By mid-afternoon, the Dow Jones index was up 40.46 to 5,527.53, despite a sharp fall in one of the biggest stocks, IBM. The benchmark 30-year Treasury bond had gained a third of a point, taking its yield down to 6.84 per cent from 6.92 per cent.