Unexpected fall in US retail sales

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Sales at retailers in the US unexpectedly fell in May for the first time in eight months, but a jump in consumer sentiment to a near two-and-a-half-year high in early June eased fears of a slowdown in the economic recovery.

The drop in sales reported by the Commerce Department followed last week's data which showed a step back in private hiring in May, but analysts still saw little risk of the economy slipping back into recession.

"The report is not evidence that the economy is getting ready for a double dip or that consumers, facing headwinds of double-digit unemployment and bank credit restriction, are taking their ball and going home," said Chris Rupkey, an economist at Bank of Tokyo-Mitsubishi in New York.

Total retail sales fell 1.2 per cent in May, weighed down by a record decline in receipts at building materials suppliers, after rising 0.6 per cent in April. Wall Street had forecast a 0.2 per cent rise in retail sales last month. Retail sales, which had risen for seven straight months, were up 6.9 per cent compared to May last year.

In a separate report, the consumer sentiment index rose to 75.5 from 73.6 at the end of May, according to the Thomson Reuters and University of Michigan's Surveys of Consumers. That was above market expectations for an increase to 74.5. Reuters