RETAIL sales in the United States rose more than expected in May and first-time applications for jobless benefits fell last week, suggesting the economy was squeezing out of a recent soft patch.

The signs of resilience in the economy, despite belt-tightening in Washington, could heat up the debate on when the Federal Reserve might start scaling back its expansive monetary stimulus.

"These data were strong and confirmed the Fed has the leeway to signal it's ready to pull out," said Robbert Van Batenburg, director of market strategy at Newedge USA LLC in New York.

The Commerce Department said yesterday retail sales rose 0.6 percent after edging up 0.1 percent in April.

Economists polled by Reuters had expected retail sales, which account for about 30 percent of consumer spending, to rise 0.4 percent last month.

So-called core sales, which strip out automobiles, gasoline and building materials and correspond most closely with the consumer spending component of the gross domestic product, added 0.3 percent after rising 0.2 percent in April.

The increase in core sales offers hope consumer spending probably would not slow too much in the second quarter, after spending fell in April for the first time in a year.

Consumer spending, which accounts for 70 percent of US economic activity, grew at its fastest pace in two years in the first quarter, boosted in part by demand for utilities. It may slow this quarter and hold economic growth to below a 2 percent annual pace.

The economy grew 2.4 percent in the first quarter of the year.

In a separate report, the Labor Department said initial claims for state unemployment benefits fell 12,000 to a seasonally adjusted 334,000 last week.

The reports indicated a pick-up in economic momentum after activity slowed early in the second quarter, which could allow the Fed to consider pulling back on monetary stimulus.

But, with industrial production weakening, economists do not expect changes to the Fed's monthly purchases of US$85 billion in bonds when its policy-setting committee meets on Tuesday and Wednesday.

Last month, sales rose in most categories, with receipts at auto dealerships rising 1.8 percent - the biggest gain since November - after adding 0.7 percent the prior month.

Excluding autos, sales gained 0.3 percent after being flat the prior month.