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updated: 1/14/2014 8:58 AM

U.S. retail sales inch up, but holiday spending weak

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  • A man and woman carry shopping bags as they cross the street in San Francisco. Americans bought more clothing in December, clicked frequently at online retailers and paid higher gas prices.

      A man and woman carry shopping bags as they cross the street in San Francisco. Americans bought more clothing in December, clicked frequently at online retailers and paid higher gas prices.
    Associated Press

 
Associated Press

Americans bought more clothing in December, clicked frequently at online retailers and paid higher gas prices. They cut back on cars and almost everywhere else, providing a lackluster end to the holiday shopping season.

Retail sales rose just 0.2 percent last month, the Commerce Department said Tuesday. That follows strong gains in October and November, helped by healthy auto sales.

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In December, car and truck sales fell 1.8 percent due to colder weather and Black Friday discounts that moved some sales into November. The decline held back overall retail spending that did show some signs of underlying strength.

Excluding spending on autos, gas and building supplies, retail sales rose a solid 0.7 percent. Economists say this figure is a better proxy for confidence in the economy, because it does not include the most volatile categories.

The report showed less spending at traditional holiday outlets. But the December gain should be enough to help generate 3 percent annualized growth in the final three months of 2013, said Paul Dales, senior U.S. economist at Capital Economics.

"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," Dales said.

Many Americans are changing the way they shop during the holidays. Online sales grew 1.4 percent in December after a 1.6 percent gain in November. Consumers also spent more at clothing stores, grocers and restaurants last month.

Still, consumers spent less on furniture and electronics. And sales at department stores fell a whopping 0.7 percent in December -- and 3.3 percent for the full year.

For all of 2013, total retail sales rose 4.2 percent, the weakest gain in four years.

The retail sales report is the first look at last month's consumer spending, which accounts for about 70 percent of all economic activity. Businesses had been anticipating that consumer spending would perk up to propel growth going forward.

Gains in consumer spending during October and November pointed toward strong growth to close out the year, as did increases in factory activity.

Auto purchases surged until December, when they were basically flat compared with a year ago. Still, for the year, car sales rose 8 percent to 15.6 million. That's the best pace since 2007, before the Great Recession began.

The modest gains in retail sales last month comes after the government said Friday that job gains slowed in December. Stronger higher builds consumer confidence and leads to more retail spending.

Just 74,000 jobs were added in December, the Labor Department said. The unemployment rate fell to 6.7 percent from 7 percent, largely because 347,000 unemployed Americans dropped out of the workforce. The economy had been creating an average of 213,500 jobs a month from August to November.

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