June 12 (Bloomberg) -- Retail sales in the U.S. rose twice as much as forecast in May as Americans used their tax rebates to shop at electronics and department stores, and record gasoline prices swelled service-station receipts.

Purchases climbed 1 percent, the most since November, following a 0.4 percent gain the prior month that was previously reported as a drop, the Commerce Department said in Washington. Purchases excluding gasoline increased 0.8 percent last month.

The figures indicate the government's stimulus plan and the Federal Reserve's seven interest-rate cuts since September are benefiting retailers such as Wal-Mart Stores Inc. and keeping the economy growing. The report bears out Fed Chairman Ben S. Bernanke's assessment this week that risks of a ``substantial downturn'' have receded.

``The gain is largely because of the rebate, but maybe the American consumer is just hanging in a lot better than we anticipated,'' said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. ``It casts more doubt on whether the economy is in a recession.''

Treasuries slid after the report, with benchmark 10-year note yields rising to 4.17 percent at 9:18 a.m. in New York, from 4.07 percent late yesterday. The dollar gained 0.9 percent to $1.5410 per euro, and stock-index futures rallied, though later surrendered their gains.

Import Prices

A separate report today showed that prices of goods imported to the U.S. rose 2.3 percent in May from the previous month, less than economists had forecast.

Initial claims for unemployment benefits rose to 384,000 last week from 359,000 the prior week, the Labor Department also reported today.

Economists' forecasts for sales ranged from a decline of 0.3 percent to a gain of 1.2 percent. Excluding autos, sales rose 1.2 percent, also exceeding the median forecast of a 0.7 percent rise.

Today's report showed sales at every merchant category increased last month, except for miscellaneous retailers.

Purchases of electronics increased 0.7 percent and sales at department stores jumped 1.2 percent, the most since March 2007. Building-material retailers sold 2.4 percent more than in the prior month.

Sales at automobile dealerships and parts stores increased 0.3 percent after dropping 2.1 percent in April. That contrasts with industry figures that showed cars and light trucks sold at an annual pace of 14.3 million annual pace in May, the fewest in almost a decade, as sales of pickup trucks and sport-utility vehicles plummeted.

GM's Plans

The surge in fuel costs is ``a structural change, not just a cyclical change,'' General Motors Corp. Chief Executive Officer Rick Wagoner said June 3 as Detroit-based GM said it would close four North American pickup and large SUV factories and focus more on making small, fuel-efficient cars.

Filling station sales surged 2.6 percent in May. Regular gasoline reached as high as $3.98 a gallon in late May, about 53 cents more than the average for the prior month, according to AAA.

Excluding autos, gasoline and building materials, the retail group the government uses to calculate gross domestic product, sales climbed 0.8 percent, after a 1 percent increase the prior month. The government uses data from other sources to calculate the contribution from the three categories excluded.

Wal-Mart Sales

Wal-Mart Stores Inc., the world's largest retailer, had a 3.9 percent jump in same-store sales last month, as consumers bought cut-rate staples and took advantage of promotions linked to the tax rebates.

``Many of our customers need to live from paycheck to paycheck,'' Wal-Mart Chief Financial Officer Thomas Schoewe told reporters last week. ``The amount they're spending on basics is a big portion of the total basket.''

Consumers cashed $350 million in rebate checks at Wal-Mart stores, Schoewe said. The retailer doesn't know how much of that was spent at the chain.

Most economists aren't convinced the jolt from the stimulus checks will last.

``This good report suggests the tax rebates are having an impact,'' Mark Zandi, chief economist at Moody's Economy.com in West Chester, Pennsylvania, said in a Bloomberg Radio interview. ``As these tax-rebate effects fade, the weaker job market is going to take over.''

Spending may grow at an annual rate of 0.8 percent this quarter, down from a 1 percent pace in the prior quarter and the weakest since the first three months of 1995, according to the median estimate of economists surveyed by Bloomberg News this month.

The bulk of the tax rebates will probably be spent from July through September, giving third-quarter growth a lift, before the economy decelerates again in the last three months of the year, the Bloomberg poll also showed.

To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

Last Updated: June 12, 2008 09:26 EDT