Effects from the payroll tax cut boosted retail sales, offsetting the impact of higher prices of food and gasoline.

Purchases for the month of February were $387.1 billion, representing a 1 percent increase from the previous month, and an 8.9 percent increase compared to the previous year. February was the eight consecutive month of growth, and the 1 percent gain was the largest since last October’s 1.6 percent uptick.

11 of the 13 areas on retail sales showed positive growth, with the biggest winner being gas service station sales, which rose 1.4 percent as a reflection of the raise in gas prices.

However, despite consumers’ willingness to spend over the course of the last month, their confidence in the economy has fallen.

The University of Michigan’s index of consumer sentiment fell 9.3 points in March to 68.2, the largest drop in more than five years.

But even with that decline, consumers had no qualms about spending money on retail.

“You didn’t witness any credit usage or the drawing of savings,” said Tom Porcelli, chief U.S. economist at RBC Capital Markets “This was completely organic.”

The benefits of January’s payroll tax cut have kept up the growth of retail sales. The average annual expected benefit per worker is $695, and more than 159 million working Americans are expected to receive larger paychecks this year then they would otherwise, according to a press release by the White House.

Mike Tommasino, a stock clerk at Waldbaums, is one of those Americans.

“I heard about the cut, but I didn’t realize what it meant until I got my paycheck,” said Tommasino. He estimated that he took home $20 more than usual on his last paycheck.

But that money did not last long. Tommasino, who drives a 2010 Hyundai Santa Fe SUV that maintains an estimated 20-miles per gallon, spent it at the pump.

“The extra money is definitely a help,” said Tommasino. “I don’t feel like I’m broke after going to the gas pump.”

He spent $47.53 at a local CITGO station to top off what was left in his gas tank, and it would have cost him $76.11 to fill his entire 19-gallon tank in New York.

Just a month earlier, he would have spent $68.66 to fill the same amount. The national average for gas has increased 40 cents over the past three weeks, to $3.52 per gallon.

While the tax cut has provided Tommasino a cushion for the rising gas prices without cutting into his other expenses, further rising of gas prices could cause a drop in retail sales.

Roughly one-third of Americans already have begun reducing discretionary spending because of fuel costs, according to the RBC Consumer Outlook Survey. Another 18 percent said would reduce spending if prices reached $3.75 a gallon.

But although there remains a fear that gas will rise to a price that will cause consumers to cut spending in any non-essential area, sales in February weren’t affected.

Excluding sales of motor vehicles, building materials and at gas stations, retail sales increased 0.6 percent, identical to the gain in January and consistent with much of the slow but steady growth that existed over the fourth quarter of 2010. “The rise in prices started in early February, but we still had a good month,” said Porcelli.

The warmer weather of February helped to further pull consumers out from their homes, as sales at restaurants and other food services locations gained 3.5 percent over the previous month.

So despite dropping consumer confidence and rising prices, retail sales continue to grow. Is this a case of consumers crying wolf?

“What consumers say and do are often two different things,” said Porcelli.