With first-quarter gross domestic product figures due April 26, the surprisingly strong retail report spurred economists to further increase projections. Analysts raised economic growth forecasts for the period Wednesday after a report showing the trade deficit unexpectedly narrowed in February. The economy had showed signs of slowing heading into 2019, before the U.S. central bank put rate hikes on indefinite hold and a government shutdown clouded the outlook.

A Federal Reserve Bank of Atlanta estimate of first-quarter gross domestic product was revised up Thursday to 2.8 percent from 2.4 percent Wednesday.

Bolstered Case

Goldman Sachs Group Inc. economists said any slowdown may be confined to the first three months of the year. “A dovish Fed pivot, the reopening of the government, and a tentative rebound in global growth have bolstered the case for reacceleration,” according to a note co-written by Goldman Sachs economist Spencer Hill.

The stronger data signal consumers may continue to drive the expansion amid solid wage gains, low unemployment, and policy makers indicating interest rates will remain on hold this year. The rebound, after a December plunge, may counter an inventory overhang that's poised to weigh on growth later this year.

“Retail sales ended 2018 abysmally and began 2019 extraordinarily,” Jefferies LLC economists Ward McCarthy and Thomas Simons wrote in a note. “With a boost from January and March, the consumer sector will be a source of growth again in the first quarter.”

Automobile dealer sales rose 3.1 percent, the most in 18 months, after a drop the prior month. Industry data from Ward's Automotive Group previously showed unit sales rebounded in March.

Twelve of 13 major retail categories increased. Sales at clothing stores increased 2 percent, the most since May, while food services posted a 0.8 percent gain, the best since July. Nonstore retailers held up with a second-straight 1.2 percent rise, as sporting goods and hobby stores saw the lone decline.

What Bloomberg's Economists Say

“Stronger-than-expected retail sales in March that spanned multiple discretionary spending categories confirm that the slowdown at the start of the year was temporary… As transitory factors abated — including a lengthy government shutdown and a shock to household confidence in response to the fourth-quarter market rout — consumer spending recovered in full force.”- Yelena Shulyatyeva and Carl Riccadonna, economists

Fed officials, who have signaled they will remain patient on any policy rate changes amid low inflation and gathering uncertainty, will be watching for indications whether consumer spending gains are likely to be sustained over time.

Sales in the “control group” subset, which some analysts view as a cleaner gauge of underlying consumer demand, climbed 1 percent and topped projections. The measure excludes food services, car dealers, building-materials stores and gasoline stations.

A separate report Thursday showed the Bloomberg Consumer Comfort's monthly gauge of economic expectations climbed to 50 from 47.5, the second increase in the last six months, as more respondents said the economy is getting better. The weekly comfort measure also rose as measures of personal finances and buying climate increased.

Sales at filling-stations increased 3.5 percent, in line with the prior month, the report showed, as oil prices rallied. Another Labor Department report this month showed gas prices rose 6.5 percent in March, the most since September 2017.

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