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But Monday's upbeat report from the Commerce Department was tempered somewhat by news that a manufacturing gauge in New York state fell this month to its lowest level since April 2009.

The sturdy retail sale report offered hope for the holiday season and the broader economy, whose recovery from the worst recession since the 1930s had slowed in the summer.

"It shows the likelihood is that the holiday period is going to be a good one for retail sales," said Tim Ghriskey, chief investment officer at Solaris Asset Management in Bedford Hills, New York.

Total retail sales increased 1.2 percent, boosted by purchases of motor vehicles and building materials, after advancing by 0.7 percent in September. The rise last month was almost double market expectations for a 0.7 percent gain.

It was the fourth monthly increase in retail sales and was the latest in a series of data to suggest the economy was squeezing out of the soft patch hit in the summer.

Separately, the New York Federal Reserve's "Empire State" general business conditions index fell to -11.1 in November from 15.7 in October. Economists had expected a tick down to 14 this month.

But analysts were unperturbed by the unexpected decline, pointing out that the survey was not a bellwether for the rest of the U.S. economy.

A loss of momentum in the U.S. recovery prompted the Federal Reserve this month to launch a controversial $600 billion round of bond buying, known as quantitative easing, to provide additional stimulus.

"It's a strong report and reflects that the economy is growing a bit faster than anticipated, perhaps in the 2.5 percent range," said Michael Woolfolk, senior currency strategist at BNY Mellon in New York.

"If the economy grows more quickly than expected, that could prompt the Fed to tilt toward a smaller QE package over the next year."

U.S. stock index futures trimmed gains on the data, while the dollar pared gains against the euro and the yen.

Motor vehicle and parts purchases surged 5.0 percent last month, also the largest increase since March, after rising 1.5 percent in September.

Excluding autos, sales rose 0.4 percent last month after a 0.5 percent increase the prior month. Markets had expected sales excluding autos to rise 0.4 percent in October.

Building materials and garden equipment sales rose 1.9 percent last month, the largest gain since April, after increasing 1.3 percent in September.

October's retail sales report showed gains across most categories, offering hope that consumers will support the economy, despite a 9.6 percent unemployment rate. Data so far for October, including nonfarm payrolls and manufacturing, have pointed to a pick-up in the growth pace.