Economists said that more jobs and rising wages were cushioning the blow from the jump in fuel costs and the slump in real estate.

``The consumer is still providing good support to the economy,'' Michael Moran, chief economist at Daiwa Securities America Inc. in New York, said: ``the job market remains reasonably firm and household balance sheets are still in good shape.''

According to a Labor Department report issued at that time, prices of goods imported into the U.S. rose a greater-than- forecast 0.9 percent in May on higher prices for oil and industrial supplies. This jump in prices brought concerns about inflation acceleration.
Treasury securities fell after the reports. The yield on the 10-year note on the contrary surge to 5.31 percent from 5.30 percent yesterday.

The 0.9 percent increase in the import price index followed a 1.4 percent gain in April, the Labor Department reported today in Washington. Prices, excluding petroleum, increase by 0.5 percent and prices of consumer goods remained the same.

"The economy is coming back stronger than anybody could imagine,' said Mark Vitner, economist at Wachovia Securities in Charlotte, North Carolina.'We were probably one of the most optimistic groups on the street, and the economy is surpassing even our expectations."

This increase in retail sales was the biggest since January 2006 and was much higher than the 0.6 percent increase predicted by Wall Street economists in a Reuters poll. All 13 categories, which are under the government control, showed an improvement in sales last month, which was the result of a 3.8 percent jump at service stations as gasoline prices went up.

According to the American Automobile Association, a gallon of regular gasoline at the pump averaged $3.12 in May, compared with $2.83 a gallon in the prior month. Prices reached an all- time high $3.23 a gallon on May 23, AAA said.

Federal Reserve Bank of Richmond President Jeffrey Lacker said last week that a ``healthy'' pace of consumer spending, a pickup in business investment and an end to the housing slump will help lift economic growth later this year.- Alla Harutyunyan for HULIQ.COM