WASHINGTON (REUTERS) - US retail sales rose more than expected in October as households bought motor vehicles and a range of other goods, pointing to sustained economic strength that could allow the Federal Reserve to raise interest rates next month.

The Commerce Department said on Tuesday retail sales increased 0.8 per cent last month, also boosted by demand for building materials likely as households cleaned up and made repairs in the wake of Hurricane Matthew.

September retail sales were revised upward to show a 1.0 per cent increase instead of the previously reported 0.6 per cent rise. The combined September and October sales gain was the largest two-month rise since early 2014.

Sales were up 4.3 per cent from a year ago. Excluding automobiles, gasoline, building materials and food services, retail sales jumped 0.8 per cent last month after an upwardly revised 0.3 per cent gain in September.

These so-called core retail sales, which correspond most closely with the consumer spending component of gross domestic product, were previously reported to have risen 0.1 per cent in September.

Economists had forecast overall retail sales increasing 0.6 per cent and core sales advancing 0.3 per cent last month.

The retail sales report added to data this month showing a rapidly tightening labor market and signs of turnaround in the manufacturing sector in underscoring the economy's strength at the start of the fourth quarter.

It also bolstered views that the Federal Reserve will raise interest rates at its Dec. 13-14 policy meeting.

The Fed this month left interest rates unchanged but said its monetary policy-setting committee "judges that the case for an increase in the federal funds rate has continued to strengthen."

The US central bank raised its benchmark overnight interest rate last December and has held it steady since, largely because of concerns over low inflation.

The economy grew at a 2.9 per cent annualized rate in the third quarter. The Atlanta Fed is currently forecasting the economy growing at a 3.1 per cent annualized rate in the fourth quarter. Last month, auto sales rose 1.1 per cent after increasing 1.9 per cent in September. Retail sales were also boosted by receipts at service stations, which advanced 2.2 per cent as gasoline prices increased.