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Retail sales fell sharply in December as demand dropped

January 14, 2015

Retailers Seek Customers After First Decline In Black Friday Shopping Since 2009Retailers Seek Customers After First Decline In Black Friday Shopping Since 2009
People carry shopping bags along Broadway in New York City.Photograph by Spencer Platt — Getty Images

U.S. retail sales recorded their largest decline in 11 months in December as demand fell almost across the board, tempering expectations for a sharp acceleration in consumer spending in the fourth quarter.

The Commerce Department said on Wednesday retail sales fell 0.9 percent last month after a 0.4 percent increase in November.

It was the biggest decline since last January and exceeded economists’ expectations for only a 0.1 percent drop and implied a slower pace of consumer spending at the end of 2014.

Still, economists saw the decline as temporary, citing a strengthening labor market and lower gasoline prices.

Indeed, the latest data show U.S. retail and food service sales leapt 4% in 2014, as an improving economy and job gains led more shoppers to open up their wallets to buy automobiles and furnishings to spruce up their homes.

The jump in retail sales was led by a strong 8.1% jump in sales of motor vehicle and parts sold by auto dealers, according to the Commerce Department report. Some top auto maker executives have already predicted sales will continue to climb in 2015.

Sales tied to the home were also strong: building material and garden equipment sales were up 5%, while furniture and home furnishing store sales leapt 3%. Housing prices have been climbing of late, albeit at a slower pace than in 2013, and home-improvement retail executives have said that when home prices appreciate, consumers are more willing to spend money for that new roof or refrigerator that they’ve been eyeing.

All pockets of the retail sector reported year-over-year gains with one notable exception: Gasoline stations sales were down 2.7% year-on-year.