U.S. retail sales rise sharply in December, personal consumption expenditure to have grown firmly in 2016

U.S. retail sales rise sharply in December, showed the advance Census Bureau report. The retail sales were up 0.6 percent; however, a little below market expectations of 0.7 percent rise. For 2016 as a whole, retail sales grew 3 percent, as compared with 2.3 percent in 2015. But it continues to be lower than the 5.1 percent average advance in the 2010 through 2014 period, noted TD Economics.

Sales at motor vehicle & parts dealers were up 2.4 percent and it mainly drove the increase in the headline figure. It is consistent with the swell in unit sales last month. Sales at gasoline stations also assisted, growing 2 percent. Stripping autos and gas, retail sales remained flat in December, quite below the consensus projection of 0.4 percent.

Excluding autos, gas, food services and building materials, the so-called ‘control group’ rose just 0.2 percent on the month, half of what was anticipated. Decline in sales in the control group were driven by miscellaneous, electronics store and general merchandise. These were more than countered by increases in none-store and e-commerce retailers, furniture, and health & personal care stores.

The strong retail sales growth in December, along with upbeat revisions to November’s print implies that American consumers were pretty positive regarding the key holiday shopping season and greatly willing to spend some of the windfall resulting from rising incomes and low gas prices, stated TD Economics. This trend is expected to continue this year as an increasingly tight labor market results in higher wages and brings additional people back into the labor force.

However, certain details of the report were less encouraging. Most of the spending surge in December came from just two categories, namely gasoline and autos. Stripping these categories, the level of sales was pretty much unchanged from the prior month on a seasonally-adjusted basis.

“The report suggests that personal consumption expenditures ended last year on a good note, rising by a relatively brisk 2.3% during the four quarter and providing some support for economic growth, which looks to have advanced by just as much”, added TD Economics.

At 04:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was highly bearish at -131.692. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex