Solid sales ease recession jitters

By Emily Kaiser

WASHINGTON (Reuters) - U.S. retail sales rose solidly in September while inflation pressures were largely muted, according to data on Friday that eased recession fears and suggested further interest rates cuts may not be needed.

The show of consumer spending power in the face of a slumping housing market and tighter credit conditions gave a lift to stocks prices and to the value of the dollar.

Bond prices fell as traders saw the data reducing chances that the Federal Reserve, which lowered borrowing costs in September, would do so again at a meeting at end of the month.

"People were expecting that perhaps the economy was on the brink of recession, but you can't have a recession if consumers are continuing to spend, and by all means, they seem to be continuing to spend," said Chris Rupkey, senior financial economist at Bank of Tokyo-Mitsubishi UFJ in New York.

When the U.S. central bank lowered rates by a surprisingly large half-percentage point on September 18, economic reports looked dour, with surprisingly weak August jobs data triggering recession fears. But the latest reports paint a less gloomy picture of an economy that is slowing but not stalling.

After the Fed moved to combat economic weakness, inflation worries also began to stir. But a report from the Labor Department showed core inflation at the producer level rose a slight 0.1 percent last month, less than economists had forecast. Including volatile food and energy costs, producer prices advanced by a larger-than-expected 1.1 percent.

"CONSUMER IS GOING TO BE OK"

Retail sales rose a bigger-than-expected 0.6 percent as sales at gasoline stations grew the most since May, a Commerce Department report showed, while car sales also were brisk.