UPDATE 1- S.Korea dept store sales jump in Aug

(Updating with analyst comment, market reaction)

SEOUL, Sept 17 (Reuters) - Sales at South Korea's department stores in August jumped at the fastest clip in seven months, data showed on Thursday, providing fresh evidence of recovering domestic demand.

The robust data followed a faster-than-expected sales growth in the U.S. retail sector for August, underlying the view that the private consumption both at home and in the U.S. has begun to pick up.

"Retail sales quickly rebounded on the shares' strong rally and growing hopes of economic recovery, although the jobs market remained fragile," said Park Sang-hyun, an economist at HI Investment & Securities.

Seoul shares .KS11 have soared more than 50 percent so far this year while the nation's unemployment rates remained at a multi-year high.

"Given the recent trends of domestic demand and exports, the economy will likely grow at around 1.5 percent in the third quarter on a quarterly basis, forcing the central bank to raise rates by at least 25 basis points in November," he said.

The monthly data showed that combined sales at Lotte Shopping Co Ltd (023530.KS), Shinsegae Co Ltd (004170.KS) and Hyundai Department Store Co Ltd (069960.KS) rose 7.6 percent in August over a year earlier, the sixth consecutive month of annual growth and the biggest gain since January's 10.4 percent.

That was largely in line with the preliminary data published last week from the finance ministry and far faster than the 4.0 percent rise in July and 3.6 percent gain in June. [ID:nSEO254536]

"Department store sales posted their strongest growth since January, backed by improved consumer sentiment," the Ministry of Knowledge Economy said in a statement.

Meanwhile, combined sales at South Korea's big discount stores fell 1.5 percent in August from a year earlier, the third month of decline in a row but easing from July's 6 percent drop, the economy ministry said.

For its part, the Commerce Department said on Wednesday that sales at U.S. retailers rose at their fastest pace of 2.7 percent in three-and-half years in August as government-sponsored auto incentives buoyed demand for motor vehicles, .[ID:nN14478930]

Shinsegae and Lotte Shopping shares were up nearly 1 percent, in line with the broader stock market, while Hyundai Department Stores shares were down 1.8 percent as of 0029 GMT.

The debt market lost ground on rate hike concerns, with front-end treasury bond futures KTBc1 falling 11 ticks to 108.62. (Reporting by Seo Eun-kyung; Editing by Ken Wills)