The biggest surge in US retail sales since September 2012 arrested a sell-off on Wall Street and paved the wall for further scaling back – or tapering – of the US Federal Reserves support of the economy.

Yesterday’s figures were interpreted as more evidence the world’s largest economy is breaking out of a slowdown caused by a harsh winter.

Retail sales rose by a seasonally adjusted 1.1 per cent from February to March compared with economist expectations of a 0.8 per cent increase, suggesting weakness in the US economy really was due to bad weather masking underlying growth.

“US consumers are back in the game after the weather-induced slump in spending,” said Millan Mulraine at TD Securities in New York.

Car sales were especially strong, up by 3.1 per cent, as more seasonable weather prompted consumers to look for a new vehicle, while clothing sales were up by 1 per cent and restaurant sales were 1.1 per cent higher.

Upgrade estimates
The bounce in retail sales will reinforce the US Federal Reserve's optimistic outlook for growth this year, and means it is likely continue to scale back or "taper" its asset purchases, now $55 billion a month.

The figures led many to upgrade their estimates for consumption in the first quarter of 2014, although January and February mean it is likely to be a weak quarter for growth.

GDP rise
Ted Wieseman, at Morgan Stanley in New York, said: "We now see first-quarter GDP rising 1.2 per cent instead of 1.1 per cent and see the second quarter on pace for an acceleration to around 3.5 per cent."

The Wall Street rebound was led by technology stocks, which have been subject to a sharp sell-off amid concerns the sector is overheating.

The S&P 500 rose 1 per cent by midday in New York, helping to offset some of last week's 2.6 per cent slide, which was the market's biggest weekly decline since June 2012.
– (Copyright The Financial Times Limited 2014 )