Retail sales in the U.S. topped economists' forecast in May as Americans' confidence grew in response to steadily rising home prices and an improving job market. The increase in sales was the highest in the last three months, suggesting that Americans are shrugging off the effect of the payroll tax hike and federal spending cuts.

The Commerce Department announced on Thursday that retail sales rose 0.6 percent in May and up 4.3 percent compared to May of last year. In the month of April, retail sales increased 0.1 percent.

Economists polled by Reuters had expected sales to increase 0.4 percent overall and 0.3 percent minus autos, gasoline and building materials. This core sales increased 0.3 percent after a 0.2 percent fall in April.