NEW YORK (CNNMoney.com) -- Retail sales came back strong in July after a weak showing in the previous month, a government report showed Friday.

The Commerce Department reported that overall retail sales last month jumped 1.4 percent, compared to a revised 0.4 percent dip in June.

It was the strongest gain since January, when retail sales surged 3 percent.

Economists surveyed by Briefing.com had forecast a retail sales increase of 0.8 percent.

Stripping out volatile auto sales, retail sales increased a stronger-than-expected 1 percent versus a revised 0.1 increase the previous month. Economists, on average, had expected an increase of 0.5 percent.

"It was a pretty healthy report. But is it really representative of a forward-moving trend?" said Michael Niemira, chief economist and director of research with the International Council of Shopping Centers (ICSC).

According to Niemira, moderate income growth is offsetting gas price inflation, thereby keeping discretionary spending alive.

This is important because consumer spending spurs two-thirds of the economy.

"Right now we're in a sweet spot. But is this a blip," Niemira said. "The same old worries still exist going into the second half of the year. I think we have not fully appreciated the impact of a housing slowdown on the broader economy. We are of the opinion that there will be a consumer spending slowdown later in the year."

Higher gasoline prices and auto sales helped boost last month's performance.

Sales at gasoline stations rose 2.5 percent, while auto sales jumped 3.3 percent in July.

Among other standouts, sales at electronics retailers increased 1.9 percent; sales of building materials rose 1.8 percent and clothing sales grew 0.7 percent.

But department stores were a weak spot. The sector posted a 0.4 percent decline in July sales. Sales of general merchandise rose only 0.3 percent.

Gregory Miller, Chief Economist for Suntrust Banks, said he also saw signs of a cautious consumer.

"Sequentially from June to July there was an obvious move up in retail sales. However, the longer-term perspective looking back tells another story," Miller said.

"The three-month and year-over-year comparisons of monthly retail sales show a new phase of a conscious process on the part of the consumer to accommodate for higher gas prices by pulling back elsewhere.

Year-over-year comparisons showed slowing growth in most retail categories. "People are moderating spending in non-energy categories, especially in big-ticker items," Miller said.

The Federal Reserve this week held interest rates steady for the first time in two years, in effect making a big bet that, for now, slowing economic growth will take the edge off rises in inflation moving forward.

But could the strong July sales report signal to the Fed that the economy may not be softening as much as it expects?

"I suspect that the Fed will be looking beyond just this one report to see any convincing signs of that," said Niemira. 'The Fed could pause its rate-hike campaign for a few months. But I don't think we're at the end of the Fed's tightening cycle."

Retailers: Pretty good grades in July.

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