Retail focused ETFs are trading around all-time highs as the sector gears up for the make-or-break holiday shopping season.

Retail sales increased in August, the most in half a year, buoyed by auto sales and higher demand. A gain of 0.9% beat expectations of 0.6% by the Commerce Department. Consumer spending has been burdened by high food and fuel costs, which have not been matched by rising payrolls and wages, reports Lorraine Woellert for Bloomberg. [ETF Chart of the Day: Retail Sector]

“You can take some encouragement from this, but it’s probably not as strong as the headline number suggests,” Millan Mulraine, a senior U.S. strategist at TD Securities, said. “The price of gas will probably make a dent as it diverts from discretionary spending.”

Market Vectors Retail ETF (NYSEArca: RTH) and SPDR S&P Retail (NYSEArca: XRT) are among the ETFs tracking the sector.

Consumer prices have risen 1.7% over the past year, falling under the 2% target of the Federal Reserve.

Hiring trends have weakened further in the second half of 2012, and the U.S. economy is not growing fast enough to reverse the pattern. The Federal Reserve has vowed to keep rates low through 2015, to help spur the economy.

Investors will be looking forward to Black Friday in November, the kick-off to the holiday retail season. Early next month, third quarter earnings season gets underway. Although companies are sitting on piles of cash, analysts are skeptical that profits will be healthy.

Market Vectors Retail ETF

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.

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