Market confidence received a booster shot this morning when it was reported that although U.S. retail sales have slipped, consumers are still spending.

May retail sales pretty much met consensus expectations, with a 0.1% rise. Excluding the slumping auto dealers, sales rose 0.3% during the month.

Strong restaurant and furniture sales joined with higher gas sales to keep spending aloft. April sales were also revised upward to 1.4% from 1.1%.

“On a year-on-year basis, retail sales grew 3.8%, which is well below the 10.8% peak in March 2000 and slower than the advances in retail sales observed through the mid to late 1990s, but consistent with continued positive economic growth,” says BMO Nesbitt Burns.

CIBC World Markets is a little more cautious of the report, noting, “That latest burst in activity looks less impressive from a broader perspective, since it came on the heels of a significant deceleration in retail activity. Year-over-year, retail and food service sales are up a moderate 3.8%, barely above where we expect May CPI to come in. Retail-related high-tech equity investors should also take note of the poor performance in the electronics category, down 3.8% year-on-year as of May.”

CIBC was a bit disappointed with the results, as it had been looking for a 0.3% rise, but the upward revision for April is keeping its quarterly forecast alive. It says, “With consumers in reasonable shape, that leaves exports and business capital spending as the likely suspects behind the current economic softness. Retail activity should stay flat through the summer with job losses weighing on confidence, but is expected to see moderate growth by September as at least a portion of tax rebates is spent.”

BMO Nesbitt Burns suggests that the report remains consistent with further rate cuts in the U.S. “While employment has softened, retail sales have yet to tip over. Consumer spending is clearly slowing, but today’s report may have been biased down by May’s unseasonably cold weather, and the upward revisions to April reduce the risks of a decline in Q2 GDP. Still, there is enough downside risk for the economy to warrant further Fed easing in the months ahead.”