Internet sales and restaurant spending lead way

Shoppers XXX in August.

Sales at U.S. retailers surged in August and posted the biggest increase in five months, offering another piece of evidence suggesting the economy sped up toward the end of summer.

Sales at retailers shot up 1.2% last month, the government said Wednesday, well above the Wall Street forecast.

Auto dealers sold more cars and higher energy prices boosted receipts at gas stations, but sales were just as strong even if those two segments are excluded. Internet retailers and restaurants were the biggest winners.

The trend in retail sales in the past year is quite robust even with high inflation. Receipts have risen 6%, well above the long-term average, though sales were more modest after taking inflation into account.

Retail sales represent a large slice of consumer spending - the main engine of growth for the U.S. economy.

Big picture: Americans are spending enough money to grease the economy, especially wealthier people who've enjoyed ever-rising stock prices. For lower-income families it's more of a struggle.

Yet part of the increase in spending merely reflects higher inflation - Americans are paying more for gas and other goods and services. The strain on families from higher inflation could persist for some time.

Market reaction: The Dow Jones Industrial Average DJIA and S&P 500 SPX were set to open higher in Wednesday trades.

-Jeffry Bartash