U.S. retail sales for August beat expectations once again, with a solid 0.8% rise. Excluding autos, sales were up .4% in the month.

“With prices falling for these goods, this represents solid growth,” says BMO Nesbitt Burns, noting that furniture sales led the rise in the non-auto results. “Chain store weakness had alerted the markets to downside risk for retailing. Although department stores lagged, falling 0.1%, general merchandise sales rose 0.6% and have advanced a solid 5.9% since last year. Thus, the actual numbers for August were a sizeable upside surprise.”

Bank of Montreal says, “Today’s report is consistent with our monitoring of a near 5% gain in personal consumption expenditure in the third quarter from the second quarter. This, in turn, supports our monitoring of 3+% growth in real GDP in the current quarter.”

BMO Nesbitt Burns agrees, “The strength in U.S. consumer spending will underpin GDP forecasts considerably above 3% for the quarter. Bond market participants remained fixated on weak stocks, with little market reaction to the data.”

Despite the persistent strength in spending through the summer, BMO notes that news that consumer confidence fell again in early September raises a question mark about the sustainability of consumption going forward. The University of Michigan’s index of consumer sentiment slipped to 86.2 in early September from 87.6 in August. The index is at its lowest level since November 2001. “Given the erosion of confidence, recent anemic job growth and rising debt levels, consumer spending could slow markedly if job growth fails to pick up soon,” says BMO.

RBC Financial Group has a more benign view of the confidence numbers, noting that, “Overall, confidence has dropped less than two points in the past two months.” It says, “Stabilizing confidence is positive for the outlook for consumption spending.”

TD Bank says that, “there remain nagging concerns about how long consumers can keep up this spending pace in light of the anaemic jobs recovery currently underway and the enormous amount of debt servicing they face. Moreover, discounting in the goods sector has been fairly widespread and has helped to prolong the consumer spending spree, and there is concern that consumers have brought forward so many planned purchases that a period of retrenchment is in store.” It predicts that consumer spending growth is likely to slow to 2%-3%. “While this type of consumer spending growth won’t prompt the Fed to cut rates, it will keep them on hold until next spring.”