Americans increased their spending at grocery stores and restaurants last month, a clear sign that consumers are still able and willing to spend.
Retail sales rose 0.4% in December from the previous month, the Commerce Department said on Thursday, though it was lower than the upwardly revised 0.8% gain in November.
The data showed that while many Americans are struggling with higher prices and high interest rates, low unemployment and rising wages continue to encourage millions of consumers to spend, supporting economic growth. On Friday, the government reported that employers increased hiring in December and the unemployment rate fell to a record low of 4.1%.
Much of the increase in spending last month was driven by a 0.7% jump in auto sales and a 2.3% increase in furniture purchases. The report is not adjusted for price increases, although the sales increase mostly reflected an increase in purchases.
After a sharp decline in 2023, inflation has remained at around 2.7% in recent months, and prices are still well above where they were four years ago. However, the Labor Department reported on Wednesday that core prices excluding the volatile food and energy categories rose more slowly last month, with clothing prices barely changing and apartment rents rising at a slower pace.
The slower core inflation data renewed hopes among economists and Wall Street investors that the Federal Reserve will cut its key interest rate again this year, after three cuts last year that brought the rate down by one percentage point to about 4.3%.
