US consumers go on shopping spree

Consumer spending makes up two-thirds of the US economy

US consumers have surprised analysts, as official figures revealed that retail sales grew 1.4% in May.

Observers said that the increase, the highest in 16 months, suggested that high petrol prices may not be biting as hard as had been feared.

The data, which also comes amid slumping house prices, buoyed market investors, with Wall Street shares offsetting some of Tuesday's losses.

Sales in April had fallen 0.1%, revised Commerce department data said.

Petrol price effect?

"Is the consumer hurting because gasoline prices have soared?" asked Joel Naroff, of Naroff Economic Advisors.

"It surely doesn't look that way. Households spent money as if it was going out of style in May as retail sales skyrocketed."

The growth was well above the 0.6% which analysts had predicted.

And when vehicle sales were stripped out, retail sales rose 1.3%, again well ahead of analysts' estimates.

Observers say that the data may add credence to Federal Reserve claims that the US economy will pick up in the second half of the year.

Warm weather had bolstered the sales figures said Julian Jessop of Capital Economics, reflected in higher demand for clothes and sports goods.