Retail sales for December did not quite measure up to expectations, but the sixth-straight monthly increase indicates that the improving economy continues to support spending.
Sales grew a respectable 0.6% last month, which comes on top of a 0.8% gain in November. Ex-autos, sales were up 0.5% in December following an impressive 1.0% the previous month. Removing gasoline and autos, so-called core sales rose 0.4% after increasing 0.6% in November.
Overall, the gains over the final two months of the year indicate a fairly upbeat 2010 holiday shopping season, though the smaller rise in December may indicate that bargain-conscious consumers were drawn into the malls by early deals offered prior to Black Friday.
Still, the rise suggests a resilience among consumers, especially given that unemployment remains high, job creation has been relatively anemic, and housing prices have been flat or declining.
Now that the Bush tax cuts have been extended for another couple of years and Congress has gone along with the president’s proposal for a temporary two percentage-point reduction in the social security payroll tax, consumers will have extra cash to fuel additional gains this year.
In the meantime, early data from the University of Michigan’s consumer sentiment survey show that confidence unexpectedly dipped in January, dropping from 74.5 in December to 72.7.
One year inflation expectations rose, mostly due to higher gasoline prices, but inflation expectations remain well-anchored going out five years.
That’s good news since the Fed shows no signs of delaying or easing up on their planned purchases of $600 billion in government securities.
Though disappointing, the dip is not that worrisome as the overall upward trend coming out of the summer slowdown remains intact.
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