US Retail Sales Broadly Advance, Capping A Solid Holiday Season

US retail sales broadly advanced in December, indicating strong consumer demand to wrap up the holiday season.

The value of retail purchases, not adjusted for inflation, increased 0.4% after an upwardly revised 0.8% gain in November, Commerce Department data showed Thursday. Excluding autos and gasoline, sales climbed 0.3%.

The retail data showed so-called control-group sales — which feed into the government's calculation of goods spending for gross domestic product — increased 0.7% in December, the most in three months. The measure excludes food services, auto dealers, building materials stores and gasoline stations.

Ten of the report's 13 categories posted increases, including gains at furniture and sporting goods stores. Auto sales advanced 0.7% after robust gains in the prior two months, bolstered by President-elect Donald Trump's threat to end tax credits for electric vehicles, as well as lower interest rates and greater manufacturer incentives. Receipts at gasoline service stations increased, reflecting higher prices at the pump.

Thursday's figures point to a consumer that held up well in the holiday season, supported by wages rising faster than prices. While underlying inflation eased last month, Americans are still contending with a high cost of living, and some retailers are considering raising prices in anticipation of higher tariffs on imported goods after Trump takes office next week.

That may distort the retail sales data going forward — because they're not adjusted for inflation, an advance could merely reflect higher prices rather than greater sales activity.

Separate data Thursday showed initial jobless claims rose by more than forecast last week, but the four-week moving average — which smooths choppiness in the data from week to week — dropped to the lowest since April, indicating low levels of dismissals.

From December 2023, retail sales advanced 3.8%, moderating from the prior three years but still defying expectations for a dramatic slowdown under the weight of high prices and borrowing costs. Consumer and business sentiment has been rising since the election but inflation expectations have climbed as well, so it remains to be seen if higher confidence translates into higher spending.

Speaking after data Wednesday showed the core consumer price index stepped down in December, several Federal Reserve officials expressed confidence that price pressures will continue to cool. Policymakers will likely hold interest rates steady at their meeting later this month, but the CPI figures opened the possibility of resuming rate cuts in March — much sooner than previously thought.

Strong Growth

Control-group sales increased 5.4% at an annualized pace in the latest three months, boding well for fourth-quarter GDP coming off a robust third quarter.

A number of consumer companies released earnings and provided mixed updated guidance Monday ahead of an industry conference taking place this week in Orlando, Florida. Macy's Inc. issued a downbeat outlook for sales in the current quarter, while other retailers including Lululemon, Shake Shack, American Eagle Outfitters, Inc. and Urban Outfitters reported positive sales results.

The retail sales figures aren't adjusted for inflation and largely reflect purchases of goods, which comprise a relatively narrow share of overall consumer outlays. Personal consumption expenditures data due Jan. 31 will provide more details on inflation-adjusted spending on goods and services in December.

Spending at restaurants and bars, the only service-sector category in the retail report, declined 0.3%, the biggest drop since the start of last year.