Not quite. Americans actually cut back last month after ramping up spending in November, perplexing analysts who had expected strong retail sales in December in light of rising job growth and sinking gas prices.
Sales fell a seasonally adjusted 0.9 per cent from November to December, the Commerce Department said Wednesday. It was the largest drop since January. Much of the decline didn't actually reflect any decline in consumer appetite: Americans spent less at the gas station because of those lower fuel prices — a decline that's included in the retail sales figures.
That said, sales in most other categories lost ground, too.
Yet analysts see no need to worry yet. Most think consumers will bounce back in coming months on the back of healthy job gains and rising confidence. Economists say many temporary factors likely held back sales in December.
Excluding the volatile categories of gas, autos, building materials and restaurants, sales dropped 0.4 per cent after rising 0.6 per cent in November. Online and mail-order sales fell 0.3 per cent, the most since April.
November's strong sales might have caused shoppers to pull back last month, economists said. Before slipping in December, for example, auto sales had soared in November.
And the financial benefit of falling gas prices can take time to register with consumers. It may take a month or two of persistent savings before consumers begin to spend the windfall.
With hiring still solid, consumer confidence rising and households reducing their debt loads, most economists expect Americans to spend at a healthy pace this year, supporting healthy economic growth.
"This isn't the start of a collapse in activity ... as that doesn't fit with the strength of employment growth and consumer confidence," Paul Diggle, an economist at Capital Economics, said in a note to clients. "As such, retail sales will strengthen again before too long."
And holiday retail sales overall, which include both November and December data but exclude gas, autos, and restaurant spending, were the highest since 2011, according to the National Retail Federation and some independent economists.
Still, stock investors were disappointed by Wednesday's report. The Dow Jones industrial average fell 266 points in mid-day trading.
Economists cited several reasons why retail sales likely fell off in December:
— Retailers engaged in heavy discounting, which lowers the dollar value of sales. The government's figures aren't adjusted for inflation. When consumer spending figures adjusted for price changes are released next month, they may paint a better picture, economists said.
— The holiday shopping season is getting stretched at both ends. Many stores launched the holiday season as early as October and even pulled forward Black Friday promotions days before the traditional Thanksgiving weekend. That likely led to weaker December sales and resulted in the declining importance of a single shopping day. In addition, gift card sales aren't recorded until they're redeemed. Those sales, as a result, may not appear until January.
— While hiring has been healthy, Americans' paychecks aren't getting any thicker. That limits their ability to spend. Average hourly pay slipped in December, the government said last week, and rose just 1.7 per cent last year. That's only slightly ahead of the 1.3 per cent inflation rate.
— Americans have been reducing their debt as a percentage of income back to 2003 levels. And they are reluctant to run up their credit cards as they did in the past: Total credit card debt fell in November from October. It is still far below pre-recession levels.
Shoppers are also shifting their spending toward experiences like eating at restaurants and other services. Sara Quinlan, senior vice-president at MasterCard Advisors, said, "We're in an experiential economy."
Diane Swonk, chief economist at Mesirow Financial, added that younger Americans in particular are spending more on mobile data services than on goods. Other big sources of consumer spending, such as health care, travel and other services, aren't included in the retail sales report.
The broadest picture of the consumer's health will come next month, when the government releases its personal spending figures, which will include all those services. That report will also adjust spending for inflation, which will capture the benefit of cheap gas and other price cuts.
General merchandise stores, a category that includes department chains as well as big-box retailers such as Wal-Mart, said that sales fell 0.9 per cent in December, the most in four years. Sellers of electronics, building materials and garden supplies, clothes and sporting goods all reported lower sales.
Restaurants were a rare bright spot with a 0.8 per cent increase. Sales also rose at furniture, grocery and health products stores.
Cheaper gas has spurred more car sales, which reached an eight-year high in 2014 of 16.5 million, according to Autodata. Those purchases slowed, however, in December from the previous month. Auto dealers and auto parts stores reported a 0.7 per cent sales drop last month, following a big 1.6 per cent gain in November.
Still, healthy auto sales last year might have left Americans with less money to spend on other goods.
AP Retail Writer Anne D'Innocenzio contributed to this report from New York.