Signals Are Mixed as U.S. Retail Sales Rise; Inflation Concern Grows As Economy Recovers
Higher prices for gasoline, lumber and food helped boost the value of U.S. retail sales last month, adding to concerns that the Federal Reserve may have to raise interest rates rapidly to control inflation, analysts said yesterday.</br></br>Retail sales rose 1.2 percent in May, reflecting consumers' willingness to spend more for a wide variety of goods, the Commerce Department reported.</br></br>While that bodes well for the strengthening U.S. economic recovery, it also adds to the reasons Federal Reserve officials are warning that they may have to raise interest rates more aggressively than many investors had expected.</br></br>"The retail sales data dovetail with some heightened concern about inflation," said Raymond W. Stone, an economist with Stone & McCarthy Research Associates. "The inflation outlook is worse now than six months ago. . . . [Fed officials] have to worry about whether that gets ingrained in expectations" that prices will keep rising.</br></br>More than half the increase in the retail sales figures probably resulted from consumers paying higher prices for goods, rather than from them buying more goods, according to Stone's analysis of the sales figures. The value of sales at gasoline stations alone rose 4 percent, accounting for about one-fourth of the total increase, he said.