The Commerce Department said retail sales increased by 0.4% in December after climbing by an upwardly revised 0.9% in November. Retail sales, excluding expenditures on restaurants, cars and gas, hit $691.9 billion. There were increases across all retail categories except sporting goods, which was down 0.5% year-over year.
December's retail sales growth shows "the dire predictions of the demise of retail are premature", Moody's vice president Mickey Chadha said. However, many questioned exactly where that increased spending would go.
United States retail sales grew more strongly than expected last month amid especially strong demand for building materials and for on-line retailers. General merchandise sales rose 0.1% from November and were up 4.4% for 2017, and department store sales fell 1.1% from November and rose 0.5% year over year.
U.S. Federal Reserve officials expected consumer spending will continue moderate growth in the near term, underpinned by the strength of the labor market, further improvements in household net worth, and buoyant consumer sentiment, according to minutes of Fed's policy meeting in December previous year.
Building materials and supplies stores were up 8.1 percent. Retailers closed a record 7,000 US stores previous year, while dozens of big-name companies, including Gymboree, RadioShack and BCBG Max Azria, filed for bankruptcy.
Electronics and appliance stores rose 6.7 percent. Clothing/accessories and health/personal care clocked in weaker growth, up 2.7 percent and 2.2 percent, respectively.
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The strength in the sector comes following the retail sales data as well as a report from the National Retail Federation showing stronger than expected holiday sales growth. "With this as a starting point and tax cuts putting more money into consumers' pockets, we are confident that retailers will have a very good year ahead".
Another key indicator, the U.S. Labor Department's consumer price index, rose 0.3%, the government said Friday.
The confidence will likely continue into this year, especially as shoppers look to spend year-end bonuses and any windfall from tax changes, Saunders said.
Sales gains weren't evenly distributed in December, according to First Data's SpendTrend.
Macy's Inc. and J.C. Penney Co. both saw their shares decline after reporting holiday sales earlier this month.
For decades, the holiday season has been a critical time for the nation's retailers, and analysts said that was particularly true in 2017.