US Consumer Prices Rebound

US retail sales increased broadly in April while consumer prices rebounded, pointing to a pickup in economic growth and a gradual rise in inflation that could keep the Federal Reserve on track to raise interest rates next month.

The reports added to labor market data in suggesting the near stall in economic activity in the first quarter was an anomaly. But a moderation in year-on-year inflation led financial markets to dial down expectations of at least two more rate increases this year, Reuters reported.

"The economy picked it up a notch from the slow start earlier this year, but the inflation fires are not burning brightly and this will likely keep the Fed on just a gradual pace for interest rate hikes later this year," said Chris Rupkey, chief economist at MUFG Union Bank in New York.

The Commerce Department said retail sales rose 0.4% last month after an upwardly revised 0.1% gain in March. Sales rose 4.5% in April on a year-on-year basis.

Excluding automobiles, gasoline, building materials and food services, retail sales gained 0.2% after advancing 0.7 percent in March.

These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.

In a separate report, the Labor Department said its Consumer Price Index rose 0.2% after dropping 0.3% in March. The rise in prices suggested that March's decline, which was the first in 13 months, was an aberration.

In the 12 months through April, the CPI increased 2.2%. While that was a slowdown from March's 2.4% increase, it still exceeded the 1.7 percent average annual increase over the past 10 years.