Updated from 9:57 a.m. EST
Retail sales were slightly higher than expected in the key month of December, according to government data Thursday, confirming postholiday reports of a last-minute surge in Christmas spending. Strong online sales and a jump in gift-card buying helped boost the number.
The Commerce Department said retail sales increased 1.2% in December to $349.4 billion, compared to a 0.1% gain posted in November. Wall Street had expected a 1.1% jump. On a year-over-year basis, December sales were up 8.7%. For all of 2004, retail sales rose 8% from 2003, the best yearly increase since 1999 when sales gained 8.5%.
"The retail Cassandras have once again been proven wrong by regular consumers," said Customer Growth Partners president Craig Johnson in a research note. "Propelled by dramatic growth in home-centered and e-Commerce purchases, retailers in tune with the needs and wants of their customers have had an outstanding Christmas season."
Excluding auto retailers, sales were up 0.3% for December over November, in line with estimates. A 4.3% jump in motor vehicles and parts helped push the overall measure higher.
Sales rose 0.4% at food and beverage stores; 1.9% at non-store retailers (Internet and catalog sales); 1.2% at building materials and garden stores; 0.5% at eating and drinking places; 0.7% at general merchandise stores; 2.2% at furniture retailers; and 0.2% at health and personal care stores. They slowed 0.2% at electronic stores and 0.6% at clothing stores.
A tepid retail sales report for November, along with a string of disappointing same-store sales reports from individual retailers, stoked widespread concern about the strength of consumer spending in the holiday season. A disappointment would have reflected badly on the broader economy, since consumer spending makes up roughly two-thirds of U.S. gross domestic product. Many companies depend on strong December sales to reach profitability for the year.
, increased promotional discounting throughout the month to drive demand, and a surge in last-minute shopping boosted the season's performance.
"Things really played out the way it has in years past," said Jim Rice, a retail analyst with Bernard Sands LLC, whose outlook was less rosy. "Things seemed slow in early December, and there was a lot of panic. Then things got real busy right before Christmas and right after. It turns out that we had an OK holiday season."
Online sales, not counted in same-store sales results, enjoyed a record holiday season, up 29% from 2003, according to comScore Networks. Also, gift cards gained in popularity this holiday. They are not reflected in sales numbers until the cards are redeemed, presumably after the Christmas holiday, and this year's post-Christmas shopping was reportedly strong.
"The results varied from segment to segment and retailer to retailer," Rice said. "The high-end did better as expected. It was a tough year for toys. Overall, I think it was your average, run-of-the-mill December."