U.S. retail sales rose more than expected in December as Americans shrugged off the threat of higher taxes and bought automobiles and a range of other goods, suggesting momentum in consumer spending as the year ended.
The Commerce Department said on Tuesday retail sales increased 0.5 percent after an upwardly revised 0.4 percent rise in November. Sales in November were previously reported to have gained 0.3 percent.
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Economists polled by Reuters had expected sales to rise only 0.2 percent. Sales were up 4.7 percent from December 2011 and rose 5.2 percent for the whole of 2012.
Manufacturing in New York state contracted for a sixth month in January, pressured by a fall in new orders and shipments, the New York Federal Reserve said in a report on Tuesday.
The New York Fed's "Empire State" general business conditions index fell to -7.8 from a revised -7.30 the month before. Economists polled by Reuters had expected a flat reading.
New orders fell to -7.2 from -3.4, while shipments fell sharply to -3.1 from 11.9.
U.S. producer prices fell in December for the third straight month as food prices declined by the most in over 1 1/2 years, while a measure of underlying prices pointed to minimal inflation pressures in the economy.
MICHAEL MORAN, CHIEF U.S. ECONOMIST, DAIWA SECURITIES AMERICA, NEW YORK:
"The retail sales report was the most important report out today. It was firmer than I thought it would be. We had a good performance in several areas. The clothing store category stood out with a gain of 1 percent. This area had been doing well and we had another good month during December. We also did well in restaurants. The auto component was up 1.6 percent. Several areas did fairly well and gave us a better reading than we thought we would get.
"The report suggests that consumers provided an element of support to the economy during December. We should get respectable results on total consumer spending for the fourth quarter of the year.
"PPI was not surprising, very close to expectations. We had restrained energy and food prices; core component was well behaved, up only 0.1 percent. No big news on the inflation front; we continue to get a subdued rate of inflation. PPI is a volatile number, but for what it's worth, it gave us a good reading on inflation in December."
SAM BULLARD, SENIOR ECONOMIST, WELLS FARGO SECURITIES, CHARLOTTE, NORTH CAROLINA:
RETAIL SALES: "Consumer spending held up well despite the headwinds from negative headlines and the 'fiscal cliff.' Real consumer spending likely picked up in fourth quarter from the third quarter, but people are worried about slower spending in the first quarter with the implementation of higher taxes and uneasiness about the debt ceiling fight. They will adjust their spending accordingly."
PPI: "Food was the story this time. It pulled back finally in December after the recent rise. But food producers will likely continue to pass on their higher costs in 2013 from last summer's draught. Given the soft global demand and soft outlook, there is not a lot of impetus to push commodity prices higher. Inflation will be pretty benign here."
TERRY SHEEHAN, ECONOMIC ANALYST, STONE & MCCARTHY RESEARCH ASSOCIATES, PRINCETON:
"December retail sales were better than expected. Motor vehicles, furniture, food and services, restaurants, all saw good sales results. Overall, this ends the year on a nice note with consumers being more active in December than was anticipated."
JOE MANIMBO, SENIOR MARKET ANALYST, WESTERN UNION BUSINESS SOLUTIONS, WASHINGTON D.C.:
"Overall, it was a mixed bag for the U.S. economy. It was a positive that we saw better-than-expected retail sales. That does suggest a resilient consumer in the face of the fiscal cliff debates. It offers a favourable sign for fourth-quarter growth. In fact both the headline number and core retail sales printed above expectations.
"The negatives...we see that manufacturing in the New York state area continued to struggle this month. That somewhat took a little of the shine off the better than expected retail sales data".
HUGH JOHNSON, CHIEF INVESTMENT OFFICER OF HUGH JOHNSON ADVISORS LLC IN ALBANY, NY:
"There are a lot of numbers and on balance the numbers are in-line with expectations if not, based on the retail sales, somewhat better than expected. The outlier is the Empire State index and that continues to be affected by Hurricane Sandy. So you can not dismiss it entirely, that is admittedly a January number, but it is somewhat clear that New York state is struggling to get back on its feet after Hurricane Sandy. So the fact we've had a slow recovery from Hurricane Sandy is not a surprise to me or anybody who lives in the state. So that is one that is an outlier and you can set it aside.
"On balance the numbers are good. Retail sales particularly is the most important of the numbers and that was, on balance, a little bit better than expected. The expectation was for a somewhat softer number. We know that automobile sales were fairly good during the month.
"On balance things look pretty good. Although everyone is interested in every economic number, there is less interest because the focus is on the debt ceiling and negotiations over spending cuts in Washington. In other words, fiscal cliff two is now the principle focus of investors so although there is interest in these numbers, quite frankly the real focus is there. That is why you are not likely to get much of a response to even good numbers."
STOCKS: U.S. stock index futures
BONDS: U.S. bond prices shaved initial gains
FOREX: The dollar extended gains versus euro and pared losses versus Japanese yen
GRAPHICS: U.S. producer prices: Producer prices unexpectedly fell by 0.2 percent in December as food prices declined the most in over one-and-a-half years. Year-on-year, headline and core PPI rose by 1.3 pct and 2.0 pct, respectively. http://link.reuters.com/hak93t
(Americas Economics and Markets Desk; +1-646 223-6300)