U.S. Retail Sales Increase

Hits Three-Month High

U.S. Retail Sales IncreaseHitting a three-month high, U.S. retail sales rose a seasonally adjusted 0.5% in December, according to data released by the Commerce Department this week. Sales for both October and November of 2012 were also adjusted slightly upward, a report showed.

Auto sales, a point of strength throughout last year, jumped 1.6% in December, with the purchasing of cars and light trucks equaling a 15.3 million annual pace. Home-furnishing stores (1.4%), bars and restaurants (1.2%), apparel outlets (1%) and Internet retailers (0.5%) posted the highest December gains. Sales decreased 1.6% at gas stations, which increased consumers' disposable incomes in time for the holiday shopping season. Among other notable decreases, sales fell 0.6% at stores that sell electronics and appliances.

Despite a better-than-expected retail close to 2012, analysts expect the first quarter of 2013 to be a troublesome period for U.S. sales. That's because Congress failed to renew a previous reduction in the payroll tax, leaving Americans with suddenly smaller paychecks. For each $50,000 in pretax income, an individual should now expect to pay $1,000 in extra taxes.

Another big drag on the economy continues to be the unemployment rate, which stands at 7.8%. Economists don't believe consumer spending will increase consistently until the unemployment rate falls to 5% or lower. As evidence of the uneven nature of the economy, the pace of spending in 2012 failed to equal the gain from 2011. In fact, U.S. retail spending rose an unadjusted 5.2% last year, down from 7.9% in 2011.