WASHINGTON -- The U.S. economy showed more signs of life as consumers stepped up purchases of automobiles, household goods, and clothing in May, the Commerce Department reported yesterday.

Over all, retail sales surged 1% to a seasonally adjusted $152.5 billion after falling a revised 0.4% decrease in April. The increase, along with other recent statistical reports on the economy, prompted private economists to conclude that, for all intents and purposes, the recession that began last July is over.

A separate report from the Labor Department showed that unemployment claims for the week ending June 1 fell 38,000 to 401,000, continuing a steady erosion in claims taht were above 500,000 as recently as April. The Labor Department also reported that the producer price index in May jumped 0.6%, the biggest gain since last October.

"Odds are recession is over," said Neal Soss, chief economist for First Boston Corp. "It's only a matter of time before the broad economic recovery is visible everywhere."

The combination of the government's three statistical reports initially rocked the bond market once again and pushed yields on the Treasury 30-year bond above 8.6% as traders worried that economic recovery would bring higher inflation. The reports also reinforced market expectations that Federal Reserve officials would hold to a steady policy on short-term rates through the summer.

In an interview, Federal Reserve Board Governor Edward W. Kelley said that while he expected the economy to recover, fears of increased inflation are unwarranted. "Fundamentally, we are in a period when inflation, is going down for a lot of reasons," he said.

Mr. Kelley said the Fed's policy of allowing "relatively slow growth" in the money supply should prove sufficient to revive the economy without a resurgence of inflation. Gains in labor productivity and a stronger dollar in foreign exchange markets also should help to contain price pressures, he added.

Private analysts said they were impressed by the 1% rise in retail sales during May because it provided the first solid evidence that consumers are picking up spending since cutting back in the winter. Consumer spending accounts for roughly two-thirds of total U.S. output, and spending fell during the last quarter of 1990 and the first quarter of 1991.

Increases in sales were widespread, with solid gains both for automobiles and other types of durable goods as well as non-durable goods. Sales by automobile dealers jumped 1.6%, and furniture sales shot up 1.5% for the second monthly gain in a row. Sales at clothing and department stores also increased for the second month.

"the retail sales figures indicated there is a broad-based consumer recovery going on," said John Silvia, vice president for Kemper Financial Services in Chicago. "The consumer is lifting this economy out of recession."

But analysts said the 0.6% rise in the producer price index was a disappointment -- even though part of the increase could be explained by special factors -- because it suggested that the recession has done little to dampen price pressures.

"Clearly, the bond market had expectations of a weaker economy and better inflation numbers than what we got, so it will have undergo a reevaluation," said Mr. Silvia. Labor officials said the increase in the index reflected a rebound in gasoline and other energy prices after decreases during the four preceding months. In addition, large increases were posted for tabacco and capital goods, which included a jump in the index for civilian aircraft. Excluding food and energy, producer prices advanced a more modest 0.4%.

"This is not a sustainable inflation level," said James Annable, chief economist for First National Bank of Chicago, who estimates prices will advance at a rate of about 3.5% this year. "This is a low-inflation environment."

But other analysts were less sanguine and said that Fed officials must be disappointed by the figures. "Frankly, I'm getting tired of explaining away noise in the statistics, and you have to start questioning the fundamentals," said Mickery Levy, chief economists for CRT Government Securities Inc. "This is exactly where the Fed does not want to be. Inflation is at too high a level considering the economy is beginning to rebound."

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