Retail sales actually increased in August for the second month in a row, giving related retail shares and exchange traded funds (ETFs) a lift. But is there really cause to be that optimistic about the American consumer?

Merchants are luring shoppers with deep discounts, a key reason the retail sales numbers surged past expectations in August by gaining 0.4%. You can look at the numbers in two ways. Shobhana Chandra for Bloomberg reports that economists believe that the economy will continue expanding, since this is the second month in a row retail numbers are up. But their expectations for August were already low that even a 0.4% increase was enough to best them. [How Checking In Boosts Retail ETFs.]

Consumers, whose purchases account for about 70% of the economy, took advantage of sales and tax-free holidays last month to shop at chains. Seventeen tax-free holidays in August probably drew more shoppers to malls, where discounts were deeper than those in July, says a retail analyst. [4 Consumer Staples ETFs For Tight Wallets.]

Tax holidays aren’t permanent, though. When will consumers be strong enough to stand on their own?

In other retail spending news, The Wall Street Journal reports that a 0.7% decline in auto sales for August was a drag on retail numbers, although they remain higher than they were at the beginning of the year. Thanks to sales to fleet customers such as car-rental companies rebounding from woeful prior-year levels, the month’s annual sales rate is seen rising 2.6% to 11.8 million, a yearly high.

J.D. Power cut its 2010 retail-sales forecast for the second-straight month, shaving another 200,000 vehicles off its view to put it at 9.2 million units. The sales outlook for the rest of 2010 is expected to remain flat, going into the year 2011.

For more stories about retail ETFs, visit our retail ETF category. Despite the troubles consumers have seen, retail ETFs by and large remain above their long-term trend lines. Find the fastest movers over at the ETF Analyzer:

  • SPDR S&P Retail (NYSEArca: XRT)
  • PowerShares Dynamic Retail (NYSEArca: PMR)
  • Consumer Staples Select Sector SPDR (NYSEArca: XLP)

Tisha Guerrero contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.