WRAPUP 4-U.S. retail sales jump, signal pick-up in growth

* Oct retail sales up 1.2 pct, largest rise in 7 months

* Sales excluding autos rise 0.4 pct, core up 0.2 pct

* New York state manufacturing gauge falls in Nov

* Business inventories up 0.9 pct in Sept

(Updates markets to close)

By Lucia Mutikani

WASHINGTON, Nov 15 (Reuters) - Sales at U.S. retailers
posted their strongest gain in seven months during October,
adding to signs the economy was regaining strength after
hitting a soft patch in the summer.

The Commerce Department said on Monday total retail sales
rose a surprisingly strong 1.2 percent, nearly double market
expectations, as consumers snapped up motor vehicles and
building materials.

The generally upbeat report was tempered somewhat by news
that a manufacturing gauge in New York state fell this month to
its lowest level since April 2009.

Still, the fourth monthly rise in sales data was widely
seen as the latest in a series that suggest a pick-up in
economic activity.

"We are starting to see some movement from temporary
stimulative factors that were supporting growth to more
permanent sources of growth," said Troy Davig, a senior U.S.
economist at Barclays Capital in New York.

Recovery from the worst recession since the 1930s braked in
the summer as the boost from a $814-billion government stimulus
package faded and a sovereign debt crisis blew up in Europe.

Retail sales grew 0.7 percent in September and markets had
expected them to rise an equal 0.7 percent last month.

Although the New York Federal Reserve's "Empire State"
general business conditions index unexpectedly fell to -11.1 in
November from 15.7 in October, economists were little worried.

They noted that the survey was very volatile and not a
bellwether for the rest of the domestic manufacturing sector.

Economists had expected the index to tick down to 14 this
month. The survey's forward-looking index of business
conditions six months ahead was more upbeat, rising to 54.6
from 40 in October.

The sturdy retail sales report, along with news of a couple
of takeover bids, helped U.S. stocks to rise early before
slipping to end marginally lower on Monday.

Yields on U.S. Treasury debt rose on further signs the U.S.
economic recovery was on track, while Ireland's fiscal problems
pressured the euro and helped lift the U.S. dollar to a
six-week high against major currencies.
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Retail sales graphic: r.reuters.com/wyg55q

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MONETARY EASING

A loss of momentum in the U.S. economic recovery during the
summer prompted the Federal Reserve this month to
controversially ease monetary policy further by announcing it
would buy $600 billion worth of government bonds through the
middle of next year.

Even though data so far for October suggest some strength
in the economy, the pace of the recovery remains too tepid to
bring down a 9.6 percent unemployment. Analysts believe this
means the Fed will not change course.

"The economy is still growing too slowly to make a dent in
the unemployment rate. But it is enough to keep the expansion
alive despite an impending slowdown in inventory investment,"
said Chris Low, chief economist at FTN Financial in New York.

A second report from the Commerce Department showed
business inventories rose 0.9 percent to $1.40 trillion, the
highest level since March 2009, after increasing by a revised
0.9 percent in August.

Economists had expected inventories to rise 0.8 percent
from a previously reported 0.6 percent increase in August.

September's larger-than-expected increase in inventories
and August's upward revision suggest the government will raise
its preliminary GDP growth estimate when it publishes its first
revision this month.

Initial estimates put third-quarter GDP at a 2.0 percent
annual rate. A 5.0 percent surge in motor vehicle and parts
purchases buoyed retail sales last month. Excluding autos,
sales rose 0.4 percent last month after a 0.5 percent increase
in September.

Building materials and garden equipment sales rose 1.9
percent last month, the largest gain since April, after
increasing 1.3 percent in September.

But core retail sales -- which correspond most closely with
the consumer spending component of the government's GDP report
-- rose 0.2 percent after a 0.4 percent increase in September.
They exclude autos, gasoline and building material sales.

There were gains across most sales categories. Receipts at
gasoline stations, clothing and clothing accessories stores
increased last month. Sales at sporting goods, hobby and book
stores saw their largest increase since March.

Retail giant Wal-Mart Stores Inc (WMT.N) is expected to
report on Tuesday that sales at existing U.S. stores fell only
a little bit in the third quarter. [ID:nN12138652]

"Although still cautious and in search of value, the
American consumer has returned," said Retail Industry Leaders
Association President Sandy Kennedy. "Retailers are happy to
turn the page on the last three years and embrace a more
optimistic future."

However, sales at electronics and appliance, and furniture
stores fell last month.
(Additional reporting by Rodrigo Campos in New York; Editing
by Andrew Hay)