Economy Watch: Retail Sales Gain Ground in December

Economy Watch: Retail Sales Gain Ground in December

December's retail sales growth shows "the dire predictions of the demise of retail are premature", Moody's vice president Mickey Chadha said. The results mean retail sales grew 4.2% in 2017, the most since 2014.

In December, U.S. retail sales increased as households purchased a range of goods and the figures for the month prior were revised higher, which indicates the economy entered 2018 with strong momentum.

The gains by retail stocks came following the retail sales data as well as a report from the National Retail Federation showing stronger than expected holiday sales growth. Sales at auto dealerships increased by 0.2 percent, while sales at service stations were unchanged.

Consumer spending is the main engine of the US economy, accounting for more than two-thirds of total economic output. November's number was upwardly revised to reflect a 0.9% increase. Sales in restaurants and bars rose 0.7 percent, while department and general merchandise stores saw a more modest rise of 0.1 percent. Still, tepid results from department stores and apparel retailers show that not every company will benefit from more shopper spending.

"After years in hibernation, consumers - accounting for 70 percent of GDP - are finally flexing their spending muscles", Johnson said.

"The improving labor market, robust consumer confidence and the imminent boost to disposable incomes from the recently-enacted tax cuts suggest that spending will continue to grow at a healthy pace over the first half of this year", said Andrew Hunter, an economist at Capital Economics.

Not all categories of retail fared well in December.

"We see a very healthy consumer, and we see a lot of signs of the strength of that consumer", Mr. Andrus said. The index reached its best closing level in three months.

Department store chain Bon-Ton Stores, Inc., announced that its comparable-store sales for the nine-week holiday period decreased 2.9%, while sales declined 6.6% in the third quarter. Bon-Ton Stores, like many other retailers, has faced challenges as customers shifted from brick-and-mortar and mall shopping toward online retailing, and The Wall Street Journal has reported the chain has considered a possible bankruptcy filing. They advanced 4.2 percent in 2017 compared to 3.2 percent in 2016. Last month, sales at electronics and appliance stores fell 0.2 percent. Sales at sporting goods and hobby stores dropped 1.6 percent, the biggest decline since November 2016. Spending was up at furniture sellers, grocery stores and restaurants.

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