Retail sales rose in December, contributing to a quarter of stronger consumer spending during the holiday shopping season, economists and government reports said Friday.
The Department of Commerce said that sales in December were helped by big gains in vehicles and furniture, and seasonally adjusted, were up 0.6 percent from the previous month. That was slightly less than the 0.8 percent forecast by analysts in a Bloomberg survey.
Still, last month’s retail sales were nearly 8 percent higher than December a year ago, and up 7.8 percent for the fourth quarter of 2010. For all of 2010, retail sales added 6.6 percent, the largest yearly gain since 1999.
“It was clearly a step up in growth in consumer spending for the quarter,” the chief economist at MF Global, James O’Sullivan, said. Personal consumption was up as much as 4 percent in the last three months of 2010, economists said, the strongest quarter since 2006.
While the numbers were signs of a slowing improving economy, economists noted that the recovery was still not on solid ground. Reports on Friday for consumer prices and industrial production showed the tentativeness of the improvements.
The broad base of consumers, said Steve Blitz, the senior economist for ITG Investment Research, “are still negatively impacted by too much debt, too little employment, and poor income growth, and therefore remain hunkered down as far as spending is concerned.”
Another measure of retail sales that excludes automobile sales, gasoline and building materials showed a modest 0.2 percent rise in December, although that category was up nearly 1.5 percent in the fourth quarter. The figures suggest that retailers bolstered sales in October and November by using discounts, which shifted purchases forward. That, and the unusually cold weather, cut into December sales, economists said.
“Once we get January numbers and see the pick-up from sales lost due to weather, we will have a more complete picture of the holiday season,” Mr. Blitz said. “Over all, however, retail sales are better and recovering but far from recovered.”
Many retailers reported that their sales slowed in the latter part of the fourth quarter, and analysts said that was partly because of the weather. On Friday, the toy manufacturer Hasbro said its fourth-quarter sales were now expected to bring in $1.3 billion compared with $1.4 billion in the fourth quarter of 2009.
“We no longer believe we will grow revenues for the year due to a slowdown in U.S. consumer demand, which we experienced late in the fourth quarter,” Hasbro’s chief executive, Brian Goldner, said in a statement.
Consumer sentiment had been expected to improve, at least according to one gauge. Economists had envisioned an improvement to 75.5 in the University of Michigan consumer sentiment index, but instead it showed a decline to 72.7 this month, which some economists said could have been attributed to higher energy prices.
But the retail statistics, although softer than forecasts, were seen as vibrant enough to suggest that consumption in the fourth quarter of 2010, while not as robust as previously thought, would contribute to gross domestic product business�ards. Economists from Goldman Sachs said in a research note on Friday that they expected that the economy grew 3 percent in the last quarter of 2010.
Some economists said that they expected a reduction in payroll taxes in 2011, under a new tax deal, could help consumption but they questioned how far that would go to sustain the upward trend in 2011 as a weak job market continued to pose a challenge.
“Disposable incomes are going to get a bump because of payroll taxes, which might help in the first quarter,” said Paul Ashworth, the chief United States economist for Capital Economics. “But overall income growth depends on what happens in the labor market, and we still have weak employment growth.”
When taken together with the consumer price report, December’s retail sales suggested that real consumption accelerated to its strongest quarter for four years, according to a research note from Capital Economics.
The Consumer Price Index rose 0.5 percent last month, driven by an 8.5 percent rise in energy prices, according to the government statistics released on Friday. The increase topped expectations.
It was the largest rise in prices since June, 2009. Consumer prices are now up an annualized 1.5 percent, the figures show. The core C.P.I., excluding food and energy, rose 0.1 percent. While rents accelerated, economists do not expect increases to be sufficient to build to a troubling level of inflation this year.
“The trend in inflation has been down,” Mr. Sullivan said. “I think the net result is we may have seen the end of deceleration.”
The Federal Reserve, which has set an unofficial goal of 2 percent inflation, reported on Friday that industrial production rose in December by the largest amount in five months. Manufacturing, utilities and mining sectors advanced in December, including revisions, pushing the country’s overall industrial production up 0.8 percent in December, and nearly 6 percent in the year.
The monthly rise was slightly higher than forecast, with utilities output showing a notable rise because of adverse weather in December. Major manufacturing output was up 0.4 percent with the exception of vehicles and construction supplies.
The Federal Reserve statistics showed there was still excess capacity in manufacturing.
“The recovery is still moving forward, but there is little evidence here of any pending acceleration in the nation’s overall output growth,” said Brian Bethune, the chief United States financial economist for IHS Global Insight.
Thomas J. Duesterberg, the president and chief executive of the Manufacturers Alliance, said some areas of the manufacturing sector could rebound in 2011, including vehicles, which could partly be helped by an aging car fleet, and energy equipment, for which global demand was accelerating and the United States had an advantage.
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