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Consumer Spending Solid at End of Holiday Shopping Season -- Update

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01/16/2020 | 11:17am EST

By Harriet Torry

WASHINGTON -- Consumers spent at a steady clip at the end of the holiday season, a sign they have continued bolstering U.S. growth.

December retail sales, a measure of purchases at stores, restaurants and online increased a seasonally adjusted 0.3% in December from a month earlier to $529.6 billion, the Commerce Department said Thursday. Excluding the volatile categories of autos and gas, retail sales rose 0.5% in December, the strongest pace of growth in five months.

Robert Frick, an economist at Navy Federal Credit Union, wrote that the strong data on core retail sales "are a relief, as they underscore that consumers, who now are almost single-handedly supporting the economy, have more confidence to spend."

Solid gains in nearly every category offset sluggish sales at bricks-and-mortar stores and a drop in motor-vehicle sales, the data showed. The final month of the holiday season is key for retail businesses, especially for department stores, clothing outlets and online sellers.

Thursday's Commerce Department report showed spending was strong in a number of key categories in the final month of the holiday season. Due to a late Thanksgiving, there were six fewer days in the 2019 holiday-shopping season compared with 2018. Cyber Monday fell in December in 2019.

Sales at electronics and appliance stores increased 0.6% from a month earlier. Clothing-store sales rose 1.6% from the prior month, and sporting-goods sales increased 0.9% in December.

December department-store sales slipped 0.8% from November and declined 5.5% from a year earlier. Meantime sales at nonstore retailers, a category that includes internet merchants such as Amazon.com Inc., were up 0.2% on the month and rose 19.2% compared with a year earlier.

After revisions, December marked the third consecutive month in which retail sales increased at a 0.3% pace, suggesting consumers headed into 2020 on a solid footing.

Justin Beebe, from Wilmington, Del., recently bought a folding bike to commute to his advertising job, to cut down on driving and save money on gas.

While the bike was a large one-off purchase at around $2,000, "over time it felt like it was worth it, saving rather than an expense," the 29-year-old said.

Consumer spending was the main driver of economic growth in mid-2019, as businesses pulled back on investment. Headed into 2020, the fundamentals underpinning consumer spending -- low unemployment and rising incomes -- remain solid.

"The U.S. consumer is quite healthy," Delta Air Lines Inc. Chief Executive Ed Bastian said Tuesday. The airline said lower fuel prices and buoyant demand from holiday travelers helped drive up quarterly earnings.

Still, Target Corp. said Wednesday that November-December holiday sales were sluggish, increasing just 1.4% for stores and digital channels operating for at least 12 months. The Minneapolis-based chain cited weak sales of toys and electronics, two categories that are big sellers during the gift-giving season.

Thursday's Commerce Department report showed car and truck sales fell 1.3% in December. Gas-station sales advanced 2.8%. Restaurant sales increased 0.2% from the prior month. Those categories are less closely tied with holiday gift-giving.

After the report, data firm IHS Markit lowered its tracking estimate of fourth-quarter gross-domestic-product growth by 0.3 percentage point to 2.3%, citing softness in core retail sales.

Write to Harriet Torry at harriet.torry@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
DELTA AIR LINES INC. -0.87% 57.87 Delayed Quote.-1.04%
IHS MARKIT LTD. -1.72% 79.06 Delayed Quote.4.92%
TARGET CORPORATION -1.06% 117.01 Delayed Quote.-8.74%
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