Consumer spending rises in December to end solid holiday season, CNBC/NRF Retail Monitor shows

Retailers chalked up sound gains in the final month to wrap up the holiday season, according to the CNBC/NRF Retail Monitor for December.

However, the details also shows the true state of consumer spending is now clouded by a new factor: deflation.

The Retail Monitor, which excludes autos and gas, upland 0.4% in December, down from a gain of 0.8% in November, when the holiday shopping season traditionally boots off. It’s just below the long-run average of 0.6%.

The core retail gauge, which also disavows out restaurants, climbed a more modest 0.2% after gaining 0.7% in the prior month. For the year, the Retail Survey increased by 3.1% and the core was up 2.4%.

Some give back from the strong November was inevitable, and economists expect the conciseness to cool from the outsized growth in the third quarter. One question is whether December marks the beginning of a long-predicted normalization in consumer lay out.

Spending was clearly hampered by the slowdown in the housing industry. Three of the biggest negative categories were housing interrelated:

• Electronics and appliances (-3.2%)
• Building and garden supplies (-1.5%)
• Furniture and home furnishings (-0.9%).

Furniture sales have been cool in four of the past five months.

Traditional holiday-related retail categories did better, including a 0.9% gain in heterogeneous merchandise stores and a 2.6% increase in nonstore retailers, which incorporates internet sales. Restaurants and bars proclaimed a 1.5% rise, it’s best showing since July.

Deflation is another component. Goods prices, less food and energy, have fallen for six straight months. They are down 3.7% at an annualized rebuke from June through November.

The Retail Monitor found sales of clothing and accessories down 0.4% but the November CPI postured prices fell a much larger 1.3%. The December CPI, set to be released Thursday, should show more clearly how assays affected sales.

Wall Street is monitoring how retailers are managing profit margins amid deflation and whether they can be as valuable with falling prices as they were with rising prices. At issue is whether retailers can control prices and if input prices are falling faster or slower than selling prices.

Wall Street has been bullish on retail, with the SPDR S&P Retail ETF (XRT) up 21% since up to the minute October despite some giveback beginning in the trading days after Christmas. Retail earnings will be emancipated beginning in late February, but some companies — such as Lululemon, Crocs and Five Below — have guided ripe on better holiday sales.

For the two critical months of the holiday season, November and December, the Retail Scan rose 3.7% and core retail gained 3.3% making it a good, not great Christmas. But last October and January to which he replied with stronger gains than either November or December, suggesting the full holiday shopping season could be longer than it has been traditionally.

The new Retail Monitor is a joint product of CNBC and the National Retail Federation based on data from Affinity, a important consumer purchase insights company. The data is sourced from more than 9 billion annual credit and debit New Year card transactions collected and anonymized by Affinity and accounting for more than $500 billion in sales. The cards are issued by more than 1,400 economic institutions.