U.S. retail sales show surprising strength

U.S. consumers may still be grappling with the effects of a brutal recession, but new figures show they're still ready to spend.

Retail sales in the U.S. rose 0.5 per cent in July a substantial improvementfrom the 0.1 per cent increase seen in June and the biggest increase in four months.

The retail sales figures showed that consumersspent more on autos, furniture and gasoline. Excluding autos, retail sales still managed a 0.5 per cent gain, which topped analysts expectations of a 0.3 per cent rise.

"The stronger than expected gain in July [excluding] auto retail sales is heartening because it provides support to the view that consumer spending is starting to rebound after being weighed down during the first half of the year," RBC assistant chief economist Paul Ferley wrote in a commentary.

The U.S. Commerce Department alsorevised sales higher in the previous two months, suggesting that the economy was not quite as weak as previously thought.

Back-to-school promotions helped boost sales in July at large chain stores. Target, Macy's and luxury chain Saks all reported gains that beat Wall Street expectations.

Wall Street market futures immediately moved higher following the release of the better-than-expected report, as consumer spendingaccounts for 70 per cent of economic growth.

Recent economic data and a downbeatforecast from the Federal Reserve earlier this week have increased fears that the U.S. might be heading back into recession.

American stock markets have been extremely volatile lately, with the Dow Jones industrial average rising or falling by more than 400 points in each of the first four trading sessions this week the first time that's ever happened.