Washington—Thanks to consumers spending on apparel and accessories among other things, lower gasoline prices and continued job growth, December retail sales rose despite worries about the fiscal cliff, the U.S. Department of Commerce reported Tuesday.
Total retail sales rose 0.5% to $415.7 billion in December following a revised 0.4% increase in December. Leading the sales increase by category was sales of autos and auto parts which posted a 1.6% increase.
That was better than economists’ average estimate for a 0.2% increase. Total sales were up 4.7% from December 2011 and rose 5.2% for the whole of 2012.
However, so-called core retail sales—which exclude automobiles, gasoline and building materials and corresponds to what economists say most closely reflect the consumer spending component of gross domestic product—increased 0.6% after gaining 0.5% in November.
Economists track consumer spending, which accounts for about 70% of the U.S. economy, to gauge how the economy is doing as a whole. Since December marked the second consecutive month of gains in core sales, economists believe consumer spending picked up in the fourth quarter after rising at an annual pace of 1.6% in the July through September quarter.
“Holiday sales grew at a pretty modest pace,” said Josh Dennerlein, economist at Bank of America Corp. “Until we see a big increase in employment growth, it’s going to be tough for consumer spending to pick up. The consumer is going to struggle a bit in the first quarter while adjusting to the new reality of the higher payrolls tax.”
‘Nonstore’ (Internet) Sales Up 12.6% from December 2011
One of the categories that had a strong performance during December was clothing and accessories which posted a 1.0% gain from November sales and a 5.1% increase compared with December 2011, the Commerce Department said.
In fact, most consumergoods categories posted increases, but the figures show that the retailers who benefits most were “nonstore” or Internet sales. Sales at general merchandise retailers were down 2.0% and department stores were down 1.7%. But nonstore retailers had a 0.5% increase from November and were ahead 12.6% compared to December 2011.
Although total holiday sales (November/December combined) missed many forecasts, December turned out to be a decent month sales wise despite fear about the fiscal cliff which was averted at the last minute by Congress on Jan. 1.
“The fiscal cliff debate weakened confidence more than it weakened actual spending as December sales finished the year in decent fashion,” Credit Suisse analysts said Tuesday.
“The retail sales report was the most important report out today. It was firmer than I thought it would be,” said Michael Moran, chief U.S. economist at Daiwa Securities America. “We had a good performance in several areas. The clothing store category stood out with a gain of 1%. This area had been doing well and we had another good month during December. We also did well in restaurants. The auto component was up 1.6%. Several areas did fairly well and gave us a better reading than we thought we would get.
“The report suggests that consumers provided an element of support to the economy during December. We should get respectable results on total consumer spending for the fourth quarter of the year.”