U.S. Retail Sales Surge Underpins Economic Resilience

U.S. retail sales saw significant growth in December, supporting the Federal Reserve's cautious stance on reducing interest rates. Sales increased by 0.4% after an upwardly revised 0.8% rise in November, signaling strong consumer demand amid stable economic conditions. The Fed anticipates only two rate cuts this year.

U.S. retail sales experienced a robust increase in December, reflecting strong consumer demand that underscores the Federal Reserve's cautious approach to reducing interest rates for the year. The Commerce Department's Census Bureau reported a 0.4% rise in retail sales last month, following an upward revision to November's figures showing a 0.8% increase.

Despite predictions from Reuters economists estimating a 0.6% advance, the actual figures highlighted a solid economic environment. This comes on the heels of positive labor market trends, with a noted surge in nonfarm payrolls and a decline in unemployment. However, December also saw overall consumer prices increase at the fastest rate in nine months.

The Federal Reserve, acknowledging potential inflationary pressures from the incoming administration's economic policies, foresees only two rate cuts in 2023. Household spending is bolstered by strong wage growth, although challenges persist for lower-income consumers. Core retail sales, crucial for gauging consumer spending's impact on GDP, also surged by 0.7% last month, confirming the economy's resilience.

(With inputs from agencies.)