U.S. retail sales faded in the final month of the year, but a key reading on spending that fuels economic growth numbers fueled the rise, adding further complexity to inflation forecasts heading into 2025.
Overall sales rose 0.4% in December to a collective total of $729.2 billion, the Commerce Department said Thursday, just inside Wall Street's consensus forecast for a 0.6% gain. November's reading was revised up to a 0.8% gain.
The figure for the closely watched control group, which excludes cars, construction materials, office supplies, gas station sales and tobacco, and which is included in the government's GDP calculations, rose 0.7% in the month. That beat Wall Street's consensus forecast of 0.4% and November's 0.4% gain.
Mastercard's SpendingPulse report, released late last month, showed sales from Nov. 1 to Dec. 24 rose 3.8% from the year-earlier period, even as the latest report reflected five fewer shopping days than in 2023.
US stocks pared gains following the data release, as traders bet that the strong spending tally, coupled with data indicating a more resilient labor market, could further reduce bets on rate cuts interest rate of the Federal Reserve in 2025.
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Futures contracts tied to the S&P 500 suggest an opening hit of 3 points, while those tied to the Dow Jones Industrial Average are seen 133 points lower. The tech-focused Nasdaq is priced to gain 50 points.
Benchmark 10-year Treasury yields rose 2 basis points to 4.681% following the data release, while 2-year bonds rose 2 basis points to 4.295%.
Related: Inflation data controls major headwinds for S&P 500 and Fed interest rate cuts
The US dollar index, which tracks the greenback's performance against a basket of six global currencies, rose 0.04% to 106.901.
CME Group's FedWatch suggests the Federal Reserve will keep rates steady at 4.375% when it meets later this month in Washington. The odds of the first rate cut of the year are set for the central bank's meeting in May.
More economic analysis:
- Bets on Fed rate cut in 2025 tied to Trump policy wild cards
- Inflation report adds complexity to interest rate cut bets
- Trump plans will test Fed's 2025 rate cut bets
Earlier this week, the Commerce Department set its headline consumer price index for December at an annual rate of 2.9%, accelerating from the 2.7% pace recorded in November and reaching the highest level since July .
So-called core inflation, which excludes volatile components such as food and energy, fell for the first time in six months, at an annual rate of 3.2%, exceeding Wall Street forecasts and setting the reading at its lowest level in more than three years.
Related: Veteran Fund Manager Issues Dire S&P 500 Warning for 2025
