Traffic remained below normal, but sales surged to 53.1, up 6.4 points from June. The Retail Sector Performance Index remained above normal at 54.9, up slightly from the previous month’s reading of 52.5. Based on a scale of 0 to 100 with 50 equaling normal, the RSPI measures retail executives’ evaluations of monthly sales, customer traffic, average transaction per customer, employment, inventories and a six-month-ahead sales outlook.

June’s retail industry sales (excluding automobiles, gas stations and restaurants) rose 7.5 percent unadjusted over last year and increased 0.5 percent seasonally adjusted from May, according to the NRF. The gains, which led second quarter sales to rise 6.1 percent over 2004, were stronger than NRF had expected.

“A flurry of economic indicators, like rising gas prices and high interest rates, have led some to speculate that consumers will pull in the reins on spending,” said Rosalind Wells, chief economist for the NRF. “But nearly every month, consumers are continuing to spend beyond our expectations.”

However, other indicators point to a sharp drop in consumer confidence in July. The RBC Consumer Attitudes and Spending by Household Index fell to 73.9 in July, down 10.1 points from 84.0 in June. Falling to its lowest level since October 2003, the RBC CASH Index reflects Americans’ worries over rising gas prices, the London terrorist attacks and job security.

“Of course, what people say and what they do can be two different things,” said Vince Boberski, director of fixed income research at RBC Dain Rauscher. “The fall in the CASH Index should make investors somewhat cautious about recent reports of solid retail sales. For instance, automakers have goosed demand with a new round of incentives, but their effectiveness may turn out to be shorter lived that Detroit would hope.”

The RBC CASH Index, conducted by Ipsos Public Affairs (Washington), is a monthly national survey of consumer attitudes on the current and future state of local economies, personal financial situations, savings and confidence to make large investments. [October 2005 PET AGE]