Americans stepped up their spending at retail stores and restaurants last month in a clear sign that consumers are still able and willing to shop.
Retail sales rose 0.4% in December from the previous month, the Commerce Department said Thursday, though down from November’s upwardly revised 0.8% gain.
The figures suggest that even as many Americans are struggling with higher prices and elevated interest rates, a low unemployment rate and rising wages are encouraging millions of consumers to spend, bolstering economic growth. Last Friday the government reported that employers stepped up hiring in December and the unemployment rate fell to a low 4.1%.
Much of last month’s increase in spending was driven by a 0.7% jump in car sales, and a 2.3% spike in purchases of furniture. The report isn’t adjusted for price increases, though the sales gains mostly reflects greater buying.
After dropping precipitously in 2023, inflation has been stuck at about 2.7% in recent months, and prices are still much higher than four years ago. Still, on Wednesday the Labor Department said that core prices — excluding the volatile food and energy categories — rose more slowly last month, as clothing prices barely increases and apartment rental costs climbed at a slower pace.
The cooler core inflation figures renewed hopes among economists and Wall Street investors that the Federal Reserve will cut its key rate further this year, after three reductions last year reduced by a percentage point to about 4.3%.
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