Rise in retail sales boosts US economy

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The United States economy received a welcome boost after weeks of sagging numbers with the release of better-than-expected retail sales figures for March as well as evidence of a sharp improvement in consumer sentiment. The warming of consumer confidence may have been triggered by progress in the war in Iraq.

The United States economy received a welcome boost after weeks of sagging numbers with the release of better-than-expected retail sales figures for March as well as evidence of a sharp improvement in consumer sentiment. The warming of consumer confidence may have been triggered by progress in the war in Iraq.

The US Commerce Department reported that retail sales jumped seasonally by 2.1 per cent last month, the largest gain since October 2001. The rise, driven largely by a jump in car sales, took Wall Street by surprise.

At the same time the University of Michigan's monthly barometer of consumer sentiment registered a significant uptick for April. The index rose to 83.2 in April from 77.6 in March. The sudden change prompted some analysts to predict further improvements in the weeks ahead.

Cary Leahey, senior US economist at Deutsche Bank Securities in New York, said: "The number is certainly positive for the economy. You're in a range where we can also feel more comfortable about consumers' expectations."

But some observers warned that the improvements may not be as meaningful as first appears, if only because they are comparing with February which was a dismal month for the retail industry.

Kurt Karl, Swiss Re's chief US economist, argued: "The correlation between confidence and spending is good on a trend sense but it's not terribly strong on a month-to-month basis. You have to watch employment, and that is likely to put a dent in consumer spending because of the recent falls."

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