Americans increased their spending at retail establishments and dining establishments in December, indicating that consumers remain eager to make purchases. The Commerce Department revealed that retail sales grew by 0.4% last month compared to November’s 0.8% increase, showing steady consumer activity despite challenges such as rising prices and interest rates. The data suggests that while many individuals are facing financial difficulties, a strong job market and higher wages are motivating millions of Americans to continue spending, thereby supporting overall economic expansion. Recent government reports also highlighted positive trends, with December seeing increased hiring and a decline in the unemployment rate to 4.1%.
The upsurge in December spending was primarily driven by a 0.7% surge in car sales and a notable 2.3% increase in furniture purchases. Although the report does not factor in price adjustments, the rise in sales largely signifies heightened consumer activity. Inflation, which significantly dropped in 2023, has stabilized around 2.7% in recent months, with costs remaining considerably higher than they were four years ago. However, core prices, which exclude volatile categories like food and energy, experienced slower growth last month, particularly evident in minimal increases in clothing prices and a deceleration in apartment rental costs.
The moderation in core inflation rates has sparked optimism among economists and investors regarding potential actions by the Federal Reserve. Speculation has grown that the Fed may further reduce its key interest rate this year after implementing three cuts in 2023, bringing the rate down to approximately 4.3%.
