A gauge of US consumer spending rose more than expected in October as households bought a range of goods, suggesting upside momentum in the economy early in the fourth quarter.
While demand is picking up, inflation remains muted.
Other data today showed an unexpected fall in consumer prices last month, which should give the Federal Reserve room to maintain its current pace of bond purchases for a while.
Retail sales excluding cars, petrol and building materials increased 0.5% last month after advancing 0.3% in September, the Commerce Department said.
Economists polled by Reuters had expected so-called core sales, which correspond most closely with the consumer spending component of gross domestic product, to rise by 0.3%.
The better-than-expected increase in core retail sales suggested consumer spending would likely accelerate from a two-year low touched in the third quarter and probably limit downside risks to economic growth during the fourth quarter.
But the increase was not enough to generate some inflation in the economy. In a separate report, the Labor Department said its consumer price index slipped 0.1% last month as petrol prices fell sharply, after rising 0.2% in September.
In the 12 months to October, the CPI increased 1%, the smallest gain since October 2009. It had advanced 1.2% in September. Economists had forecast consumer prices to be unchanged last month.
Stripping out the volatile energy and food components, the so-called core CPI edged up 0.1%, rising by the same margin for a third consecutive month. That could heighten concerns among some US central bank officials about inflation being too low.
Over the past 12 months, the core CPI increased 1.7%, matching the prior month's rise. The Fed targets 2% inflation, although it tracks a gauge that tends to run a bit below the CPI.
The absence of inflation in the economy suggests the Fed will probably stick to its monthly $85 billion bond buying programme at least until early 2014 as it tries to stimulate demand through low interest rates.
Fed Chairman Ben Bernanke said last night the US central bank would maintain its ultra-easy monetary policy for as long as needed, adding that policymakers wanted evidence of durable job growth before scaling back bond purchases.
Core retail sales last month were bolstered by sturdy gains in receipts at clothing, furniture, electronics and sporting goods shops, among others.
Sales at electronics and appliance stores rose by the most since April, suggesting a residual boost from the introduction of Apple's new iPhone the previous month.
The report suggested little impact from a 16-day partial shutdown of the federal government in October, which economists had expected would dampen sales. Sales at car and parts dealers rebounded 1.3% after falling 1.2% in September.
That helped to offset a drop in sales at petrol stations and a fall in receipts at building materials and garden equipment shops, lifting overall retail sales 0.4% in October.
Retail sales were flat in September and economists had expected them to edge up 0.1% last month.
