Retail Sales Surge 2.1 Percent in March

WASHINGTON – U.S. retail sales rebounded with surprising strength in March, posting their strongest showing since the fall of 2001, the government said on Friday in a report that should ease fears the Iraq war and rising gas prices would keep shoppers from the stores.

The Commerce Department said retail purchases jumped 2.1 percent in the month, well above Wall Street analysts' expectations and the biggest monthly gain since October 2001, when sales were recovering after the Sept. 11 attacks.

March sales excluding autos rose 1.1 percent. In other reassuring news, February's sales slide was revised to a less severe 1.3 percent from the previously reported 1.6 percent.

Analysts had expected sales to bounce back from the drop in February, but the size of the gain was unexpected. Economists polled by Reuters had projected overall retail sales to climb 0.6 percent, and sales excluding autos to advance 0.4 percent.

Financial markets rose on the news. Stocks in London extended gains and the U.S. dollar rose, while prices for safe-haven U.S. Treasury securities dropped sharply.

"It may suggest some momentum may be building as we get into April," said Patrick Fearon, an economist with A.G. Edwards & Sons in St. Louis.

Uncertainty generated by the war in Iraq, along with its related 24-hour television coverage, has taken a toll on some retailers. On Thursday, the nation's largest retailer, Wal-Mart, said sales at its stores open at least a year were up a slim 0.7 percent in March, the worst monthly performance since December 2000.

"This is good news for the economy," said Tim O'Neill, chief economist, BMO Financial Group in Toronto.

Commerce said March auto sales advanced 5.3 percent, their biggest increase since December last year. Building materials sales surged a record 7.9 percent, more than making up for a 5.8 percent fall in snowbound February.

Retail sales make up a substantial portion of overall consumer spending, which accounts for two-thirds of U.S. economic activity. With hiring stalling in recent months, economists have been waiting to see if consumers would respond by tightening their purse strings, putting more pressure on an already fragile U.S. economy.

Elsewhere in the March report, sales of furniture and home furnishings rose 1.5 percent, while apparel purchases were up 1.1 percent. Gasoline station sales fell 0.3 percent, confounding analysts' expectations that they would rise to reflect the increase in prices in the run-up to the Iraq war.