US retail sales point to firmer consumer spending
WASHINGTON: US retail sales rose solidly in December as Americans shrugged off the threat of higher taxes and bought automobiles and a range of other goods, suggesting momentum in consumer spending as the year ended.
Other data on Tuesday showed inflation pressures remained muted, with wholesale prices declining for a third straight month in December. That should allow the Federal Reserve to stay on its very easy monetary policy path to nurse the recovery.
Retail sales increased 0.5% after rising 0.4% in November, the Commerce Department said, beating economists’ expectations of only a 0.2% gain.
Consumers showed resilience even as the economy teetered on the edge of a so-called “fiscal cliff” US$600bil of automatic government spending cuts and tax increases that were scheduled to start kicking in at the beginning of this year.
“Consumers continue to provide underlying support for the economy,” said Eric Green, chief economist at TD Securities in New York.
Sales rose 5.2% for the whole of 2012.
So-called core sales, which strip out automobiles, gasoline and building materials and correspond most closely with the consumer spending component of gross domestic product, increased 0.6% last month after advancing 0.5% in November.
The second straight month of gains in core sales suggested consumer spending picked up in the fourth quarter after rising at an annual pace of 1.6% in the July through-September period. Consumer spending growth is seen expanding at around a 2.3% rate in the last three months of 2012.
While some economists lifted their fourth-quarter gross domestic product forecasts after the sales data, weak exports, a slow pace of inventory accumulation and the reversal of a surge in defence spending will keep growth below 2%.
The economy grew at a 3.1% rate in the third quarter. A second Commerce Department report showed business inventories rose a modest 0.3% in November, backing views restocking would not support growth in the fourth quarter.
Retail shares on Wall Street rose on the data, helping to support the overall stock market. The Morgan Stanley retail index ended up 1.5%.
While an 11th hour deal by Congress avoided the worst of the “fiscal cliff,” households will still see reductions in their paychecks starting in January. That could cause a step back in spending early this year. – Reuters