The U.S. Commerce Department reported today that retail sales for the month of March rose 1.6%. Excluding vehicle sales, sales rose 0.6%. Consumer spending is pegged to grow between 3% and 3.5% in the first quarter, the strongest showing in three years.

Retail shares mostly moved up on the news, with JCPenney Co. (JCP) rising nearly 2% and Hot Topic Inc. (HOTT) up more than 14%. Target Corp. (TGT) saw shares fall slightly after the opening, but the stock price has gained back all that plus another 0.3%. Shares in Wal-Mart Stores (WMT) are down slightly as higher-end retailers gain. Nordstrom (JWN), for example, is up more than 2%.

On the one hand, the sales boost is good news and indicates that consumers are willing to go out and spend on cars, clothes and building materials. The U.S. Labor Department reported that the core consumer price index remained flat in March. Other recent data from the Labor Department indicates that non-farm payrolls are also rising, putting more cash in consumers’ pockets.

On the other hand, there is some concern that the rise in consumer spending is only temporary. In contrast to the Labor Department data, an economist from IHS Global Insight said that new spending is really a decline in savings because it is very likely that consumers’ disposable income fell during the first quarter of 2010. High unemployment and higher debt levels are conspiring to rein in spending going forward. And if wages are not growing, that only compounds the problems.

March sales at building materials stores rose 3.1% as the weather gets warmer. Clothing stores’ sales were up 2.3%, and vehicle sales rocketed up 7.5%, due almost entirely to the huge incentives automakers were offering to consumers.

Electronics and appliance sales fell 1.3%, and retail gasoline stations saw a decline of 0.4%, turning around six months of growth.

Data on inventories is mixed, with the inventory-to-sales ratio improved in March, even as businesses started to build inventories as the economy continues to improve. Manufacturing inventories grew 0.5% in February, and wholesale inventories increased by 0.6%. Retail inventories grew 0.3% in February, including automobiles. Excluding autos, retail inventories fell 0.1%.

The signs of improvement are tentative at best. Substantial, sustainable improvement depends on lowering unemployment, improving access to credit, and rising wages. So far, all these elements are still weak. The good news is that they’re not getting worse.