Retail sales ended 2017 on a high note, while price inflation at both the retail and wholesale levels are of so little threat to the economy, some analysts are wondering if they will keep a lid on planned interest rate hikes.
The Commerce Department reported Friday that retail sales in the U.S rose 0.4% in December from the month before, meeting a consensus estimate from analysts, and following an upwardly revised November surge of 0.9%.
Compared to a year earlier, December retail sales were up 5.4%. For all of 2017, retail sales were 4.2% higher than 2016, the biggest annual hike in three years. That compares to a 3.2% rise in 2016 over 2015.
Core sales, those excluding food services, autos, gasoline and building materials, rose 0.3%, as expected – but the prior month’s advance was revised sharply higher to 1.4% from 0.8%. Core sales spiked to an 8.9% annual rate in the fourth quarter, the most in the post-recession period.
“While the increase in spending wasn’t as broadly based as one would like, the show of strength in recent months is a testament to the strong financial tailwinds, relating to wealth, income and credit, pushing on consumer backs,” said Sal Guatieri, senior economist at BMO Financial Group.
The report also showed online sellers and other non-store retailers extended their dominance in December, increased 1.2% after a 4.2% spike in November, at the expense of traditional department stores which reported a 1.1% decline. Also, furniture sales jumped 7.5% in the year, reflecting strength in home sales, Guatieri noted.
“With consumers and businesses showing few signs of letting up their relentless pace and bound to get a fillip from tax cuts in the new year, the Federal Reserve has little choice but to raise [interest rates] in March,” Guatieri said.
However, not everyone agrees with his take on