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U.S. retail sales rise in December, capping a strong year in spending

U.S. retail sales rise in December, capping a strong year in spending
U.S. retail sales in 2017 grew the most in three years. (Mark Lennihan / Associated Press)

American consumers continued to spend at stores in December, capping a robust year for retailers.

U.S. retail sales rose 0.4% the final month of the year after a 0.9% increase in November, the U.S. Department of Commerce said Friday. The results mean retail sales grew 4.2% in 2017, the most since 2014.

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Combined with last month's glowing consumer spending data, economists say, the U.S. economy is showing signs of strength going into the new year.

"We aren't sure who gets the credit for the strongest advance in consumer spending since 2010, but it is likely tied in part to the massive tax cuts from Washington and perhaps the Fed's easy money too-low interest rate policy for this stage of the business cycle with the economy in its ninth year of expansion from the end of the recession," said Chris Rupkey, chief financial economist at MUFG Union Bank in New York, in a note to clients Friday. "The tax cut from Washington may just make this the longest economic expansion in modern economic history looking back to the 1970s."

The retail sales numbers reflect spending at both online and bricks-and-mortar stores and restaurants, but doesn't include sales of automobiles. It's a key gauge for the economy, which derives about two-thirds of its output from consumer spending.

The positive outlook is good news for retailers, who have been struggling. Fifty retailers filed for bankruptcy last year, including big brands such as Payless Shoe Source and Toys R Us, according to S&P Global Market Intelligence. There were also nearly 7,000 announced store closures in 2017, according to Fung Global Retail & Technology.

Another key indicator, the U.S. Labor Department's consumer price index, rose 0.3%, the government said Friday. Rising inflation reflects a strengthening economy, which could give the Federal Reserve more room to raise interest rates.

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The Associated Press contributed to this report.

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