Washington - Americans shrugged off high gasoline prices in March and spent more strongly than expected, suggesting economic growth in the first quarter was probably not as weak as many had feared.
Retail sales increased 0.8%, the Commerce Department said on Monday, after rising 1.0% in February.
Last month's gains handily beat economists' expectations for only a 0.3% rise and indicated sturdy consumer spending in the first three months of 2012. Consumer spending accounts for more than two third of US economic activity.
"Warm weather can explain some of the increase, but it is apparent that households are feeling more confident and are more willing to open their pocketbooks, despite higher gasoline prices," said Stuart Hoffman, chief economist at PNC Financial Services in Pittsburgh.
Analysts are optimistic that the economy grew at an annual pace of at least 2.5% in the January-March period, which would be a far more than the sub-2% rate many had expected earlier in the quarter.
The economy grew at a 3.0% rate in the fourth quarter. But the rising optimism over the economy was tempered by a report showing manufacturing in New York state slowed sharply this month as shipments of goods weakened.
Factories, however, hired more workers and received higher prices for their goods, giving the report a mixed tone.
The New York Federal Reserve Bank said on Monday its "Empire State" manufacturing activity index fell in April to 6.56, the lowest reading in five months, from 20.21 in March.
Another report showed confidence among homebuilders slipped in April for the first time in seven months amid expectations of a slower sales pace in the next six months.
The Dow Jones industrial average ended higher on the retail sales report. US Treasury debt prices were little changed, but the dollar fell against a basket of currencies.
Broad-based sales gains
The rise in sales last month was broad-based, even though Americans paid 27 cents more per gallon of gasoline than they did the prior month.
So far, Americans appear to be taking rising gasoline prices in stride, thanks to a mild winter that has p ushed down natural gas prices and cut household heating bills.
For now, economists said the signs of strength in consumer spending reduced the chances of further monetary easing by the Federal Reserve through bond purchases, or quantitative easing, even though job growth slowed in March.
The US central bank meets next week and is not expected to make any major policy announcement.
"The sales data indicates, at the moment, that no additional quantitative easing is needed. It's simply just not necessary," said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York.
Motor vehicle sales extended the prior month's gains. However, the 0.9% rise in sales was at odds with data from dealers showing a decline in unit sales.
Excluding autos, retail sales climbed 0.8% last month after advancing 0.9% in February.
Elsewhere, high gasoline prices pushed up receipts at service stations. There were sturdy increases in the sales of clothing, furniture, building materials and garden equipment, restaurants and bars, electronics and appliances.
Excluding autos and gasoline, sales advanced 0.7% in March, adding to the prior month's 0.5% gain.
A second report from the Commerce Department showed business inventories increased 0.6% to a record $1.58 trillion as auto dealers restocked to meet increased demand for motor vehicles from consumers.
Business sales increased 0.7% to a record $1.24 trillion in February, after advancing 0.4% the prior month. At February's sales pace it will take 1.28 months for businesses to clear shelves, unchanged from January.