US retail sales drop 0.9 percent in December, but holiday sales rise

US retail sales declined 0.9 percent last month, but retailers saw a 4 percent increase in holiday spending. Falling gas prices and steady job growth may be the reason. 

REUTERS/Jonathan Alcorn/File
Shoppers are pictured during day after Christmas sales at Citadel Outlets in Los Angeles, California. The Commerce Department said on Wednesday retail sales excluding automobiles, gasoline, building materials and food services fell 0.4 percent last month after a 0.6 percent rise in November.

US retail sales last month fell a surprising 0.9 percent, their biggest drop since January of last year. Despite steep decline in gas prices and promising signs of job industry growth, US consumers still pulled back on spending at retailers in December.

Sales were expected to fall slightly after an increase of 0.7 percent was seen in November,  but market expectations  of a 0.1 percent drop were significantly undershot.

Clothing, electronics, cars, sporting goods, general merchandise, building materials and more all took a hit, according to the Commerce Department's Wednesday report. 

“Due to this retail sales report, we are lowering our fourth quarter real consumer spending growth forecast from a 4.1 percent increase to approximately 3.5 percent,” Chris Christopher, an economic analyst at IHS Global Insight, writes via e-mailed analysis. 

The restaurant business was the best-performing sector in December, with a 0.8 percent increase.

There was some solace for retailers, however: in growth terms, the holiday shopping season was the strongest since 2011, according to the National Retail Federation. Holiday sales rose 4 percent to $616.1 billion, with online retailers, again, showing bigger gains.

“Retailers were price discounting early and hard. The fourth quarter was very strong on the consumer front due to relatively strong employment reports, elevated consumer confidence levels and falling gasoline prices,” writes Mr. Christopher.

Consumers shopped the most in the months before December with November being a good month for autos and discretionary spending.

“And, when that type of thing happens, consumers hang back a bit the next month. Most consumers got their holiday shopping needs out of the way in November and therefore December was relatively weak,” Christopher writes. "Looking ahead, 2015 consumer spending and disposable income gains are likely to outpace 2014."

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