Shoppers splurged on a wide range of goods in March, including cars, clothes, furniture, and building and garden supplies. January's and February's overall sales figures, meanwhile, turned out to be better than estimated, rising by 0.5 percent and 1 percent, respectively.
The latest snapshot of retail activity showed that consumers have a hearty appetite to spend. That's good news for the economy because consumer spending accounts for roughly two-thirds of all economic activity in the United States.
Economists said stronger job growth, tax refunds, and super-low borrowing costs probably made shoppers feel more inclined to treat themselves.
The 1.8 percent increase in retail sales last month marked the biggest advance since March of last year and exceeded analysts' expectations.
With the health of the economy a major issue in the presidential campaign, the Bush administration was quick to seize on the retail sales figures. ''It's another sign that our economy is strong and growing stronger," said White House press secretary Scott McClellan.
In a second economic report, businesses increased inventories by 0.7 percent in February -- the biggest hike since August 2000, the Commerce Department said.
Some economists are expecting the economy to grow at a rate of around 5 percent, or possibly more. That's up from previous estimates of around a 4.5 percent pace. The government will release its estimate for first-quarter gross domestic product on April 29.
In an effort to help the recovery flourish, Federal Reserve policy makers have held a key short-term interest rate at a 45-year low of 1 percent since June of last year. But Fed chairman Alan Greenspan and other Fed policy makers have reminded Main Street and Wall Street numerous times that rates can't stay at such super-low levels indefinitely.
That has prompted some economists to predict the Fed will start pushing up rates later this year, possibly in August. Others, however, don't see a rate increase until 2005. There seems to be agreement the Fed will leave rates alone at its next meeting in May.
