WASHINGTON (AP) — 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.
Retail sales rose 0.5 percent in December from November, the Commerce Department said Tuesday. That's slightly better than November's 0.4 percent increase and the best showing since September.
Sales of autos and auto parts rose 1.6 percent to lead all categories. Car companies closed out their best sales year since 2007.
Total retail spending was even stronger when factoring out a steep drop in gas prices.
And so-called core retail sales, which exclude gas, building materials and autos, rose 0.6 percent after a 0.5 percent increase in November. Economists pay closer attention to core sales because they strip out the most volatile categories and are a better gauge of consumer spending.
Two straight months of solid increases in core sales suggest 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 Barack Obama allowed a two-year reduction in Social Security payroll taxes to lapse. 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.
"Nothing in today's data does anything to dispel the notion that consumer spending the first half of 2013 should be quite weak," said Dan Greenhaus, chief global strategist at BTIG. "''The smaller paychecks will be anything but a welcome development."
Consumer spending drives roughly 70 percent of economic activity.