WASHINGTON — U.S. consumers increased their spending at retail businesses in December, buying more autos, furniture, and clothing. Steady job growth and lower gas prices kept consumers shopping for the holidays, despite worries about potentially tax increases.
The Commerce Department said today that retail sales rose 0.5 percent in December from November, slightly better than November's 0.4 percent increase and the best showing since September.
A 1.6 percent jump in sales of autos and auto parts led all categories. Car companies closed out their best sales year since 2007.
Total retail spending was even stronger when factoring out a drop in gas prices. Excluding a 1.6 percent decline in gas station sales, retail spending increased 0.8 percent.
The December increase suggests consumers were not too worried about tense negotiations to resolve the fiscal cliff. Congress and the White House ultimately reached a deal on Jan. 1 that prevented income taxes from rising for most households.
Still, retail sales are likely to weaken in the first half of 2013 because lawmakers and President Obama allowed a two-year reduction in Social Security payroll taxes to end. Most Americans will start seeing less money in their paychecks this month.
A person earning $50,000 a year will see take-home pay shrink by roughly $1,000 in 2013. That's likely to slow consumer spending and weigh on overall economic growth.
The retail sales report is the government's first look at consumer spending, which drives roughly 70 percent of economic activity.
Despite the December gain, 2012 ended as the worst year for retail sales growth since the Great Recession ended more than three years ago. Retail sales rose just 5.2 percent last year. That's slower than the 7.9 percent growth in 2011 and 5.6 percent growth in 2010.
Earlier this month, major retailers reported that a last-minute surge in spending helped salvage the crucial holiday shopping season. Retails can often make as much as 40 percent of their annual revenue during the final two months of the year.
In addition to strong car sales, the government report showed consumers spent 1.4 percent more at furniture stores, 1.4 percent more on health and personal care, and 1 percent more at specialty clothing stores.
Sales were flat at general merchandise stores, a category that department stores such as Macy's and big retailers such as Wal-Mart and Target. But that followed a 0.8 percent decline in November.