WASHINGTON -- A gauge of U.S. consumer spending rose more than expected in December, suggesting the economy gathered steam at the end of last year and was poised for stronger growth in 2014.
The Commerce Department said Tuesday retail sales excluding automobiles, gasoline, building materials and food services, increased 0.7 percent last month after a 0.2 percent rise in November.
The so-called core sales correspond most closely with the consumer spending component of gross domestic product. Economists polled by Reuters had expected core retail sales to rise 0.3 percent in December.
The increase suggested consumer spending accelerated in the fourth quarter from the third quarter's 2 percent annual pace. It was also the latest indication of strong momentum in the economy at the end of 2013.
Though job growth stumbled in December, that was largely seen as temporary given the cold weather that gripped parts of the country during the month.
"Weather aside, %VIRTUAL-article-sponsoredlinks%if we're right in thinking that the underlying trend in jobs growth is still improving, households will continue to spend more freely in 2014," said Paul Dales, senior U.S. economist at Capital Economics in London.
"Overall, this report supports our view that a 4 percent annualized rise in real consumption will help to generate a decent 3 percent gain in overall GDP in the fourth quarter of last year," he added.
U.S. stock index futures extended gains on the report, while prices for U.S. Treasury debt were little changed.
A stock market rally last year and rising home values have boosted household wealth, encouraging Americans to open their wallets a little bit more.
Core sales last month were lifted by a 1.8 percent rise in receipts at clothing stores. Sales at food and beverage stores recorded their largest increase in seven years. There were also increases in online store sales.
A cold snap during the month likely contributed to holding down sales of automobiles. Receipts at auto dealers fell 1.8 percent, the largest decline since October 2012. Auto sales had risen 1.9 percent in November.
That limited overall retail sales to a 0.2 percent gain in December. Retail sales increased 0.4 percent in November. Economists had expected retail sales to edge up 0.1 percent last month. For all of 2013, retail sales rose 4.2 percent.
Retail sales excluding automobiles rose 0.7 percent. Sales of furniture, sporting goods, building materials and garden equipment and electronic appliances fell.
Domestic inflation continues to trend lower and the lack of price pressures mean the Federal Reserve will likely keep interest rates near zero for a while even as it scales back its monthly bond purchases.
9 Numbers That'll Tell You How the Economy's Really Doing
Retail Sales Rise Solidly in December, but Auto Sales Slip
The gross domestic product measures the level of economic activity within a country. To figure the number, the Bureau of Economic Analysis combines the total consumption of goods and services by private individuals and businesses; the total investment in capital for producing goods and services; the total amount spent and consumed by federal, state, and local government entities; and total net exports. It's important, because it serves as the primary gauge of whether the economy is growing or not. Most economists define a recession as two or more consecutive quarters of shrinking GDP.
The CPI measures current price levels for the goods and services that Americans buy. The Bureau of Labor Statistics collects price data on a basket of different items, ranging from necessities like food, clothing and housing to more discretionary expenses like eating out and entertainment. The resulting figure is then compared to those of previous months to determine the inflation rate, which is used in a variety of ways, including cost-of-living increases for Social Security and other government benefits.
The unemployment rate measures the percentage of workers within the total labor force who don't have a job, but who have looked for work in the past four weeks, and who are available to work. Those temporarily laid off from their jobs are also included as unemployed. Yet as critical as the figure is as a measure of how many people are out of work and therefore suffering financial hardship from a lack of a paycheck, one key item to note about the unemployment rate is that the number does not reflect workers who have stopped looking for work entirely. It's therefore important to look beyond the headline numbers to see whether the overall workforce is growing or shrinking.
The trade deficit measures the difference between the value of a nation's imported and exported goods. When exports exceed imports, a country runs a trade surplus. But in the U.S., imports have exceeded exports consistently for decades. The figure is important as a measure of U.S. competitiveness in the global market, as well as the nation's dependence on foreign countries.
Each month, the Bureau of Economic Analysis measures changes in the total amount of income that the U.S. population earns, as well as the total amount they spend on goods and services. But there's a reason we've combined them on one slide: In addition to being useful statistics separately for gauging Americans' earning power and spending activity, looking at those numbers in combination gives you a sense of how much people are saving for their future.
Consumers play a vital role in powering the overall economy, and so measures of how confident they are about the economy's prospects are important in predicting its future health. The Conference Board does a survey asking consumers to give their assessment of both current and future economic conditions, with questions about business and employment conditions as well as expected future family income.
The health of the housing market is closely tied to the overall direction of the broader economy. The S&P/Case-Shiller Home Price Index, named for economists Karl Case and Robert Shiller, provides a way to measure home prices, allowing comparisons not just across time but also among different markets in cities and regions of the nation. The number is important not just to home builders and home buyers, but to the millions of people with jobs related to housing and construction.
Most economic data provides a backward-looking view of what has already happened to the economy. But the Conference Board's Leading Economic Index attempts to gauge the future. To do so, the index looks at data on employment, manufacturing, home construction, consumer sentiment, and the stock and bond markets to put together a complete picture of expected economic conditions ahead.