Holiday shopping turned out even better than expected in December as shoppers picked up the pace to close out a strong 2023, the Commerce Department reported Wednesday.

Retail sales increased 0.6% for the month, buoyed by a pickup in clothing and accessory stores as well as online nonstore businesses. The results were better than the 0.4% Dow Jones estimate.

Excluding autos, sales rose 0.4%, which also topped the 0.2% estimate.

The report comes amid speculation about how much strength the U.S. economy possessed heading into the new year, when growth is expected to slow. However, a resilient consumer could signal more momentum and possibly give the Federal Reserve some caution about how to proceed on interest rates.

Stock market futures held negative following the release

On a year-over-year basis, retail sales ended 2023 up 5.6%. The numbers are not adjusted for inflation, so sales show that consumers are more than keeping up with an annual inflation rate of 3.4% as measured by the consumer price index. The CPI increased 0.3% in December, also lower than the retail sales increase.

Another measure of retail sales strength that excludes sales from auto dealers, building materials stores, gas stations, office suppliers, mobile homes and tobacco stores rose 0.8% for the month. The Commerce Department uses this so-called control group when computing gross domestic product.

The report showed broad-based strength in sales for the month, though there were a few areas of weakness.

Health and personal care store receipts declined 1.4% and gas stations saw a 1.3% drop as fuel prices eased. Furniture and home furnishing stores sales also fell 1%.

On a yearly basis, food services and drinking places saw the biggest gains, rising 11.1% though sales were flat in December. Both health and personal care and electronics and appliances saw 10.7% increases. Gas stations dropped 6.6%.

In other economic news Wednesday, import prices were unchanged in December, despite the Wall Street estimate for a 0.5% decline and following a 0.5% drop the previous month. Export prices, however, slid 0.9%, the same as in November.

The reports come with markets anxious over the direction of Fed policy. Current market pricing anticipates the central bank enacting six quarter-percentage point rate cuts in 2024, twice what Fed officials indicated in December. Stronger-than-expected economic growth and inflation could force the Fed into keeping policy more restrictive.

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