LDN - Business

Retail sales rise on strong auto demand

[January 13, 2017] WASHINGTON, Jan 13 (Reuters) - U.S. retail sales rose solidly in December amid strong demand for automobiles, providing further evidence that the economy ended the fourth quarter with momentum and is poised for stronger growth this year.

The Commerce Department said on Friday retail sales increased 0.6 percent last month. November's retail sales were revised up to show a 0.2 percent rise instead of the previously reported 0.1 percent gain.

Sales were up 4.1 percent from December 2015. They rose 3.3 percent for all of 2016, up from 2.3 percent in 2015.

Excluding automobiles, gasoline, building materials and food services, retail sales rose 0.2 percent after being flat in November. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.

Economists polled by Reuters had forecast overall retail sales increasing 0.7 percent and core sales gaining 0.4 percent last month. The report added to surveys on manufacturing and the services sector in suggesting that the economy regained speed at the end of the fourth quarter after appearing to lose some ground in November.

Rising wages due to a tightening labor market are expected to support consumer spending this year, providing a boost to the economy. Growth is also expected to get a lift from President-elect Donald Trump's pledge to cut taxes, increase infrastructure spending and relax regulations.

Average hourly earnings increased 2.9 percent in the 12 months through December, the largest gain since June 2009, the government reported last week.

Against the backdrop of a labor market that is at or near full employment, Trump's proposed fiscal stimulus could fan inflation and prompt the Federal Reserve to raise interest rates faster than is currently envisaged.

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A customer pushes a shopping cart at a Walmart store in Chicago, Illinois, U.S. November 23, 2016. REUTERS/Kamil Krzaczynski

The Fed raised its benchmark overnight interest rate last month by 25 basis points to a range of 0.50 percent to 0.75 percent. The U.S. central bank has forecast three rate hikes for this year. The Atlanta Fed is forecasting GDP rising at a 2.9 percent annualized rate in the fourth quarter. The economy grew at a 3.5 percent pace in the third quarter.

Last month, auto sales increased 2.4 percent after falling 0.2 percent in November. Receipts at service stations rose 2.0 percent, reflecting higher gasoline prices.

Sales at building material stores increased 0.5 percent.

Receipts at clothing stores were unchanged despite a generally busy holiday season. Department store giants Macy's and Kohl's Corp last week reported drops in holiday sales.

Department stores have faced stiff competition from online rivals including Amazon.com <AMZN.O>. Sales at online retailers jumped 1.3 percent last month after gaining 0.3 percent in November.

Receipts at restaurants and bars fell 0.8 percent, while sales at sporting goods and hobby stores rose 0.2 percent.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

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