“The intense summer heat combined with back-to-school promotions brought shoppers back into the stores,” said Rosalind Wells, chief economist for NRF. “This shows that it is impossible to count the consumer out just because of high prices at the pump.”

Figures released by the U.S. Commerce Department show that July’s total retail sales, including non-general merchandise categories such as autos, gasoline stations and restaurants, rose a stronger-than-expected 1.4 percent seasonally adjusted from June and increased 3.9 percent unadjusted year-over-year.

While sales were strong across most retail categories, stores promoting back-to-school merchandise outperformed expectations.

Sales in health and personal care stores were up 0.6 percent from June and rose 8.4 percent unadjusted over last year.

Building materials and garden equipment and supplies dealers rose 1.8 percent from the previous month and soared 10.8 percent unadjusted over last year. Furniture and home furnishings sales also continued to rise, increasing 0.5 percent from June and rising 8.8 percent unadjusted over last July.

But it’s not clear whether the summer bounce will last: The Consumer Attitudes and Spending by Household Index from RBC Capital Markets (New York) was 80.1 in July, compared with 84.1 in June.

“Despite mortgage rates rising to a four-year high (approaching 6.75 percent for a 30-year fixed-rate loan), the price of oil testing a record high above $75 per barrel and the national average of mid-grade gasoline remaining above $3 per gallon in recent weeks, consumers appear to be wavering only slightly in their outlook,” said T.J. Marta, economic and senior currency strategist for RBC Capital Markets. “The modest drop in the overall index reflects the fact that the Fed’s 2.25 percent hike in interest rates since June 2005 is only now beginning to impact economic growth. The RBC CASH Index supports our view that consumers will moderate their spending in coming months.”

The RBC CASH Index 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. It includes four sub-indexes: RBC Current Conditions Index; RBC Expectations Index; RBC Investment Index; and RBC Jobs Index.

In July, consumers’ confidence in future conditions cooled somewhat, bringing the RBC Expectations Index to 34.2, down from 40.4 in June. Americans were slightly less confident in their ability to make household purchases (38 percent were more confident in July, compared with 40 percent in June) and their ability to invest in the future (40 percent were more confident in July, compared with 44 percent in June). On the other hand, their attitudes toward major purchases improved slightly (35 percent were more confident in July, compared with 32 percent in June).

To view the entire RBC CASH Index report, visit www.rbc.com/newsroom/rbc-cash-index.html. [October 2006 PET AGE]