A pullback in automobile sales helped temper the pace of overall retail sales in March, but the growth in other sales continued to show there has been little letup in Americans' spending habits despite rising interest rates.

Retail spending rose 0.4%, but excluding the sharp drop in auto sales, the

Commerce Department

said Thursday that retail sales jumped a solid 1.4%.

Meanwhile, wholesale prices in March rose a sharp 1%, almost entirely because of a spike in energy prices early in the month. But excluding energy and food costs, the

Labor Department

said, its

producer price index

rose only 0.1% in March.

While both government reports were skewed by special factors -- in this case, weak auto sales and volatile energy costs -- economists said the overall message is that there are few signs of inflation even though the economy continues to grow at a phenomenal pace.

Looking beyond the special factors, the data confirmed the "high growth, low inflation" mantra that has marked much of the current economic expansion. That helped to stem any significant effect on financial markets.

The 30-year Treasury bond was down 12/32 at 105 23/32 Thursday morning, pushing its yield up to 5.83% from 5.81%. The

Dow

was down 67 points, or 0.6%, to 11, 057, while the

Nasdaq

was up 59 points, or 1.6%, to 3829 rebounding slightly from its 286-point selloff Wednesday.

The 0.4% overall rise in retail spending in March exceeded the 0.2% gain expected by economists surveyed by

Reuters

of 0.2%. But the 1.4% surge in sales excluding automobiles was far in excess of economists' forecasts of a 0.5% increase.

In addition, February sales growth was revised upward to 1.8% from a previously reported 1.1%, providing more evidence that Americans, whose wealth has grown because of a booming labor market and stock market gains, have continued to spend heavily.

"Consumer spending is showing renewed vigor, and neither higher interest rates nor faltering technology stocks have done anything to stem the pace of retail sales," said Kevin Flanagan, fixed-income strategist at

Morgan Stanley Dean Witter

.

The

Federal Reserve

has raised interest rates five times for a total of 1.25 percentage points since last June in an attempt to slow domestic demand. In theory, higher rates slow economic growth by making it harder for consumers and businesses to borrow and spend. But thus far, the Fed's rate increases have had little effect on consumer demand overall economic growth.

Economists say that frantic pace of spending in February and March is likely to buoy first-quarter annualized gross domestic product, which is expected to be "well above 5%" said Brian Fabbri, chief economist at

Paribas Capital Markets

. That would be a moderation from the 7.3% annualized rate of growth in the fourth quarter of 1999, but well above levels that would ease the Fed's concerns about inflation.

Fabbri added that the figures would likely put real consumer spending growth for the quarter at a 7% pace -- which would be the highest rate of spending during the current nine-year economic expansion.

Fabbri noted that recent sharp declines in the Nasdaq provided a sign that a portion of the economy might be settling back toward noninflationary levels of growth. But, he said, it would take "a broader destruction of wealth through a more varied index of equities, real estate prices and incomes before we can argue that the Fed is getting more comfortable."

Fed officials, including chairman

Alan Greenspan

, have repeatedly voiced concerns that strong consumer demand, wealth related to rising stock prices and the tightest labor market in 30 years are threatening to ignite inflation because those factors are pushing up overall demand faster than supply.

But signs of a meaningful acceleration in inflation have yet to show up in the economy.

For instance, March's 0.1% increase in the core producer price index, a measure of wholesale prices that businesses pay excluding food and energy costs, was a significant deceleration from February's low 0.3% rate.

The 0.1% gain met the forecasts of economists polled by

Reuter

s.

But the 1% increase in the overall producer price index in March was higher than the 0.7% that economists had expected. That rise came in a month that saw the largest increase in gasoline prices since February 1999, as oil prices rose above $30 a barrel.

The government also said that producer prices in the year ended March grew at their fastest pace since December 1990 because of the recent spike in oil prices.

The lack of significant core wholesale price pressures eases concerns that the Fed might step up the magnitude of its interest rate increases. But most economists believe that strong domestic demand will cause the Fed to continue raising interest rates by 0.25 percentage point when policy makers meet on May 16, and many think raise rates will rise further in months to come.

On Wednesday, a Fed governor, Laurence Meyer, noted that interest rates thus far have had "nearly zero" success in slowing the U.S. economy, and that the central bank will continue to raise interest rates until it starts to see meaningful signs that inflation is less of a threat.