INSTANT VIEW: U.S. retail sales rise; producer prices jump

NEW YORK (Reuters) - Sales at U.S. retailers rose at their fastest pace in three-and-half years in August as government-sponsored auto incentives buoyed demand for motor vehicles, according to data on Tuesday that also showed strong sales outside the auto sector.

U.S. producer prices rose more than twice as much as expected in August on the biggest surge in gasoline prices in more than 10 years and prices declined less than expected compared with a year ago, a government report showed on Tuesday.

KEY POINTS:

RETAILS SALES * The Commerce Department said total retail sales climbed 2.7 percent, the biggest monthly advance since January 2006, after declining by a revised 0.2 percent in July. Sales in July were previously reported to have eased 0.1 percent. * Analysts polled by Reuters had forecast retail sales rising 2.0 percent in August. Sales in August were a bolstered by the government's "cash for clunkers" program, which gave consumers cash to swap aging gas-guzzlers for new, more fuel efficient models. High gasoline prices also added to the rise in sales. * Motor vehicle and parts sales surged 10.6 percent in August, notching their biggest rise since October 2001. The auto scheme ended in August.

PPI * The Labor Department said the seasonally adjusted index for prices paid at the farm and factory gate jumped 1.7 percent last month and fell 4.3 percent from August 2008. Analysts expected producer prices to rise 0.8 percent on the month and to fall 5.3 percent on the year.

COMMENTS:

STEVEN WOOD, CHIEF ECONOMIST, INSIGHT ECONOMICS, DANVILLE,

CALIFORNIA:

"Retail sales surged in August, primarily due to a jump in auto sales because of the "cash-for-clunkers" program that has now expired and gasoline station sales due to higher prices. However, there were gains in most spending categories. However, with the "cash-for-clunkers" program now expired, auto sales are likely to plunge next month. Rising unemployment and stagnant income growth will limit spending in the months ahead. Nevertheless, real consumer spending appears to have risen moderately in Q3, helping to propel positive economic growth during the quarter."

PETER BOOCKVAR, EQUITY STRATEGIST, MILLER TABAK + CO, NEW YORK: "August Retail Sales were much better than expected. The report is a pleasant surprise as there was a fear that the clunker plan would steal sales from other categories. There were tax holidays and the Labor day calendar shift that helped to boost sales and the same store sales data for August seen 2 weeks ago were better than expected. With the clunker plan now over, we'll see what impact overall it will have in the Sept data next month."

CHRIS RUPKEY, CHIEF FINANCIAL ECONOMIST, BANK OF

TOKYO/MITSUBISHI UFJ, NEW YORK:

"Not only are consumers spirits soaring, but their purchases and trips to the mall are as well. The V-shaped recovery just got a badly needed shot in the arm today as the consumer is back in the game in a big way. The Fed is going to need to stop talking about its exit strategy and start implementing it if today's data keeps up. This isn't an unsustainable cash-for-clunkers model consumer, this is a consumer that is in a lasting full recovery mode. The outlook for the economy just brightened considerably.

DAVID SLOAN, ECONOMIST, 4CAST LTD, NEW YORK:

"It is all pretty positive. There was nothing really stunning in terms of surprises, all the surprises were to the upside. The retail sales obviously was inflated by the cash-for-clunkers, and the autos rise is going to be reversed. It seems that the ex-autos numbers was positive at 1.1 percent, and less than half of that was explainable by gasoline. All of the data is on the positive side, although nothing dramatic."

T.J. MARTA, MARKET STRATEGIST, MARTA ON THE MARKETS, SCOTCH

PLAINS, NEW JERSEY:

"Retail sales show the recovery is here. This wasn't just autos, it wasn't just gasoline. This was the U.S. consumer getting out of their foxhole. This is indisputably a good number."

"Supporting this number, the Empire State manufacturing is up to a high since before the recession started."

"In terms of PPI, definitely the deflationary impulse from late last year is gone and there is still no real core pipeline pressure. Overall, this is a very good benign state of data releases we got this morning."

"Treasury yields got a spike on this."

PETER KENNY, MANAGING DIRECTOR, KNIGHT EQUITY MARKETS, JERSEY

CITY, NEW JERSEY:

"All of these numbers are quite good. I also like the lack of revisions because it means we're not just getting decent numbers, we're also not looking back and saying stuff we had actually wasn't as positive as we thought. The numbers are good for the market and confirm the trend for the futures.

"The retail sales number shows more strength for consumers than we were thinking. Hopefully it won't be hopeful thinking that the trend for consumers and retail sales is continuing to improve."

MARKET REACTION: STOCKS: U.S. stock index futures add to gains BONDS: U.S. Treasury debt prices add to losses DOLLAR: U.S. dollar extends gains versus yen