Gosh, from the recent retail report, you'd think the economy is back on track. But, of course, you'd be wrong.

Retail sales in the U.S. rose twice as much as forecast in May. Twice as much. Sales climbed 1%, and as Bloomberg says, it was the most since November, and it followed a 0.4% gain in April. Excluding gasoline, purchases increased 0.8% last month. For the quarter, though, spending may grow at an annual rate of 0.8%, the weakest since the first quarter of 1995.

So what happened in May? Americans used their tax rebates checks of course. All those who criticized the government's stimulus plan, saying the money would not be spent on discretionary purchases were wrong. Consumers spent the money at electronics and department stores, at least the portion that was left after filling up the gas tank at $4 a gallon. Don't forget the Federal Reserve's successive rate cuts. Those could have had something with the increase in retail sales too.

Now some economists even venture to say that the American consumer may be a lot more resilient than anticipated, and that perhaps the U.S. could avoid a major downturn recession after all. Well, some people, I guess, can't help but being excessively optimistic. Saying that would be to ignore the housing slump, credit crunch, high (and increasing) oil and food prices and the softening labor market.

But it's true: the report was positive, showing sales increases at every category, even building materials, believe it or not and even at car dealerships (despite automakers reporting slower sales during the month). Will it last? Well, more checks are coming that will likely boost spending in the third quarter too, but the softening labor market is bound to catch up with consumers.

Still, I bet the ones with the biggest smiles on their faces sit in Bentonville, AR these days. Wal-Mart Stores Inc. (NYSE: WMT) reported a 3.9% jump in same-store sales last month, because even if consumers are intent on spending during tough times, they'd still like to get more bang for their declining buck. To wit, consumers cashed $350 million in rebate checks at Wal-Mart stores. Part of it had to have been spent there too. No wonder WMT shares are up 1.88% today and 23% since the beginning of the year. WMT's turning out to be a great defensive play during these tough times.