The Commerce Department said on Tuesday that retail sales gained 0.2
percent last month, even as receipts at automobile dealers recorded
their biggest drop in more than a year.
November's sales were, however, revised to a 0.4 percent increase
from 0.7 percent. Excluding autos, sales rose 0.7 percent in
December, the largest increase in 10 months.
"The surge in sales in December means the momentum will continue
into the first quarter of the new year. 2014 is shaping up to be
pretty good from where we sit," said Chris Rupkey, chief economist
at Bank of Tokyo-Mitsubishi UFJ in New York.
Economists had expected retail sales to rise just 0.1 percent last
month. For all of 2013, sales increased 4.2 percent.
Sales excluding automobiles, gasoline, building materials and food
services, increased 0.7 percent after a 0.2 percent rise in
November. Economists looked for a gain of just 0.3 percent.
These so-called core sales correspond most closely with the consumer
spending component of gross domestic product, and the increase
suggested consumption accelerated in the fourth quarter from the
third quarter's 2 percent annual pace.
While a report on Friday showed job growth stumbled in December,
that was largely dismissed as being due to cold weather, and
economists said a wealth of other data suggest the economy is
"Weather aside, if we're right in thinking that the underlying trend
in jobs growth is still improving, households will continue to spend
more freely in 2014," said Paul Dales, senior U.S. economist at
Capital Economics in London.
"This report supports our view that a 4 percent annualized rise in
real consumption will help to generate a decent 3.0 percent gain in
overall GDP in the fourth quarter," he added.
The government report suggested holiday sales were better than some
had expected, though at the cost of heavy discounting by
shopkeepers. The National Retail Federation said a measure of
holiday sales, which leaves out spending on cars, gasoline and
restaurant meals, rose 3.8 percent in the November-December period
from a year earlier, up from the 3.5 percent rise in 2012.
FOURTH-QUARTER GROWTH LOOKING STRONGER
Fourth-quarter growth prospects were further boosted by a second
report from the Commerce Department showing retail inventories,
excluding autos, increased 0.6 percent in November after increasing
0.3 percent in October.
Businesses aggressively accumulated inventories in the third quarter
and warehouses were left bulging. Economists had anticipated a need
for businesses to sell off those goods, which would have undercut
production in the fourth quarter.
It now appears some of the inventory buildup was planned.
[to top of second column]
"It does not appear that the fourth-quarter GDP report will feature
a drag from inventories and, possibly, might even show a modest
further addition to growth," said John Ryding, chief economist at
RDQ Economics in New York. "It is hard to argue that this pickup in
inventory investment is excessive."
The economy grew at a 4.1 percent rate in the third quarter,
which was the fastest pace in almost two years. Fourth-quarter GDP
growth estimates range as high as a 3.9 percent rate.
Stocks on Wall Street were trading higher on the data, while the
dollar rose against the yen. U.S. Treasury debt prices fell.
A stock market rally last year and rising home values have boosted
household wealth, encouraging Americans to open their wallets a
little bit more.
Sales last month were lifted by a 1.8 percent rise in receipts at
clothing stores. Sales at food and beverage stores recorded their
largest increase in seven years. There were also increases in online
"Consumer spending continues to get tailwinds from the recovery in
the housing market, as well as fortuitous declines in the price of
gasoline," said Brian Bethune, chief economist at Alpha Economic
Foresights in Boston.
A cold snap likely held down sales of automobiles. Receipts at auto
dealers fell 1.8 percent, the largest decline since October 2012.
They had risen 1.9 percent in November.
Sales of furniture, sporting goods, building materials and garden
equipment and electronic appliances also fell.
A separate report from the Labor Department showed import prices
were unexpectedly flat in December, showing no signs of imported
Domestic inflation continues to trend lower and the lack of price
pressures means the Federal Reserve will likely keep interest rates
near zero for a while even as it scales back its monthly bond
(Reporting by Lucia Mutikani; editing by
[© 2014 Thomson Reuters. All rights
Copyright 2014 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.