WASHINGTON (AP) — Ebullient U.S. consumers shopped at the healthiest pace in more than a decade during the holiday season, a sign of burgeoning economic strength.
Retail sales rose 0.4 percent in December, the Commerce Department said Friday, after a 0.9 percent surge in November. Spending for the two months combined was the best since 2005.
The strong holiday shopping figures caused economists to ramp up their estimates for economic growth in the October-December quarter. Americans are more confident about the economy and are more willing to spend. The unemployment rate is at a 17-year low of 4.1 percent.
Oxford Economics, a consulting firm, now forecasts the economy expanded at a 3.2 percent annual rate, up from 2.6 percent before the report. If accurate, that would mean growth topped 3 percent for three straight quarters for the first time since 2005.
Healthy spending is also a good sign for the economy this year. Consumer spending accounts for about 70 percent of U.S. economic output.
“The improving labor market, robust consumer confidence and the imminent boost to disposable incomes from the recently-enacted tax cuts suggest that spending will continue to grow at a healthy pace over the first half of this year,” Andrew Hunter, an economist at Capital Economics, said.
Retail sales rose 4.2 percent in 2017, the most in three years.
Online retailers reported a strong sales gain of 1.2 percent. Department and general merchandise stores, which include Macy’s as well as Target and warehouse clubs, saw sales rise by just 0.1 percent.
Sales at home and garden stores jumped 1.2 percent and increased 0.7 percent at restaurants and bars. A few sectors didn’t fare as well: Sales fell 1.6 percent at sporting goods stores and 0.3 percent at clothing stores.
Consumer confidence reached a 17-year high in November, though it slid in December. Spending hasn’t risen as much as the increase in confidence would suggest.
Overall consumer spending, which includes spending on services as well as at retailers, increased 2.2 percent in the July-September quarter, after rising 3.3 percent in the April-June quarter. Those are solid figures but not much different from previous years. Overall consumer spending data for the fourth quarter hasn’t been released yet.
Still, Americans are lifting their spending faster than incomes are growing. That has lowered savings and lifted credit card debt. Figures from the Federal Reserve show that credit card debt reached a record high in December of $1.02 trillion, though that number isn’t adjusted for inflation.
The economy expanded at a 3.2 percent annual rate in the spring and summer, the first time growth topped 3 percent for two quarters since 2014. Economists forecast the economy expanded at a roughly 2.5 percent to 3 percent in the October-December quarter.