WASHINGTON U.S. retail sales unexpectedly rose in May as consumers bought motor vehicles and a range of other goods, which could help to support the economy this quarter.

Retail sales increased 0.3% last month after rising 0.4% in April, the Commerce Department said on Thursday. Economists polled by Reuters had forecast sales slipping 0.1%.

Retail sales are mostly goods and are not adjusted for inflation. Food services and drinking places are the only services category in the retail sales report.

Though inflation and higher interest rates are causing consumers to be more selective and price sensitive, spending has remained resilient, thanks to strong wage gains resulting from a tight labor market. Some households still have savings accumulated during the COVID-19 pandemic.

The Federal Reserve kept interest rates unchanged on Wednesday for the first time since March 2022 when the U.S. central bank embarked on its fastest monetary policy tightening campaign in more than 40 years.

But the Fed, which has hiked its policy rate by 500 basis points in this tightening cycle, still anticipated rate increases this year. Fed Chair Jerome Powell told reporters that the labor market had surprised many "with its extraordinary resilience," adding it was "really the engine, it seems that is driving the economy."

Though the unemployment rate rose to a seven-month high of 3.7% in May, it remains very low by historical standards.

Excluding automobiles, gasoline, building materials and food services, retail sales gained 0.2% last month. Data for April was revised slightly lower to show these so-called core retail sales rising 0.6% instead of 0.7% as previously reported.

Core retail sales correspond most closely with the consumer spending component of gross domestic product.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, grew at its fastest pace in nearly two years in the first quarter, offsetting the drag on GDP growth from a sharp inventory slowdown. The economy grew at a 1.3% annualized rate last quarter. The Atlanta Fed is currently estimating GDP rising at a 2.2% pace in the second quarter.

Jobs market resilience was confirmed by a separate report from the Labor Department on Thursday showing initial claims for state unemployment benefits unchanged at a seasonally adjusted 262,0000 for the week ended June 10. Economists polled by Reuters had forecast 249,000 claims for the latest week.

Some of the elevated reading in claims is because of recent policy changes in Minnesota making non-instructional educational staff eligible for state unemployment benefits during the summer break.

The number of people receiving benefits after an initial week of aid, a proxy for hiring, increased 20,000 to 1.775 million during the week ending June 3, the claims report showed.

The so-called continuing claims remain low by historical standards as some laid off workers could be finding work easily, with 1.8 job openings for every unemployed person in April.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)