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U.S. Retail Sales Rise More Than Expected Amid Increase In Auto Sales

U.S. Retail Sales Rise More Than Expected Amid Increase In Auto Sales

Retail sales in the U.S. rose by more than anticipated in the month of December, according to a report released by the Commerce Department on Tuesday, with the sales growth partly due to a notable increase in auto sales.

The report showed that retail sales rose by 0.5 percent in December following a revised 0.4 percent increase in November. Economists had expected sales to edge up by 0.2 percent compared to the 0.3 percent growth originally reported for the previous month.

Paul Ashworth, Chief U.S. Economist at Capital Economics, "The apparent strength of U.S. retail sales growth over the final few months of last year suggests that the looming fiscal cliff, including the risk of higher taxes, did little to deter consumers over the holiday shopping season."

However, other economists noted that the pace of retail sales growth is likely to slow in the current quarter due to the expiration of the payroll tax cuts.

The increase in retail sales in December was partly due to a 1.6 percent increase in sales by motor vehicle and parts dealers, which followed a 2.7 percent increase in November.

Excluding the increase in auto sales, retail sales increased by 0.3 percent in December compared to a 0.1 percent drop in November. The increase in ex-auto sales matched economist estimates.

Sales by furniture and home furnishings stores, health and personal care stores, and food services and drinking places also saw notable growth, while sales by gas stations fell by 1.6 percent.

Core sales, which exclude autos, gas, and building materials, increased 0.6 percent in December following a 0.5 percent increase in November.

Sal Guatieri, Senior Economist at BMO Capital markets, said, "This suggests some upside risk to our estimate of a 2.3% annualized gain in real consumer spending in Q4 following the lukewarm 1.6% increase in Q3. Though still sub-par, this would mark the best pace in three quarters."

"Although spending will likely stumble in the current quarter (1.5% expected) due to higher payroll and income taxes, it should strengthen to a 3% average rate in the second half of the year on improved household finances, pent-up demand and housing-related purchases," he added.

by RTT Staff Writer

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