U.S. retail sales surprised on the downside for November, slipping 3.7% in the month.

BMO Nesbitt Burns notes that September 11, plunging gas prices, and zero-rate financing in the auto sector have generated incredible volatility in this data lately. “But we can spy relative stability in the underlying trend — sales excluding autos and gasoline are essentially in line with the August level. Restaurant chains have been hit, and drug stores supported, by the September 11 tragedy. Similarly, gasoline sales have plunged, and auto sales soared.”

BMO notes that department stores have been a bright spot, and that holiday spending appears relatively flat. “Certainly, there has been no free-fall,” it says.

CIBC World Markets agrees, noting, “The cleanest look at retail trends is to strip out both autos and gasoline — sales excluding those items have rebound from September, but still are running 0.2% below August.

There’s still no momentum in the core of U.S. retail activity. But Q4 consumption will benefit by not having the disastrous month of September in the tally.”

CIBC says that by the first quarter, zero financing will either be coming off or further fading in its influence, “and real consumption is likely to be negative. Overall quarterly GDP growth could show the opposite pattern, however, since Q4 sales were largely generated by drawing down inventories, and business investment spending was particularly weak in the final quarter of 2001.”

“The jury is still out on holiday spending and the trend in retail sales,” admits BMO. “It’s remarkable how well spending has held up in the face of huge layoffs. The tax rebates were probably a big help, as were lower energy costs, mortgage refinancing, and the zero-rate vehicle loan programs. As this is written, Congress is locked in partisan wrangling over further stimulus. Not producing a package is ‘too bad to be true’ and we assume another dose of Federal cash will be on the way to prop up retailing in the New Year.”