Retail sales increased 0.5% in December after increasing an upwardly revised 0.4% (from 0.3%) in November. The Briefing.com consensus expected retail sales to increase 0.2%.

The pickup in retail sales was in-line with the 0.7% aggregate wage gain reported in the December employment situation data. Surprisingly, the negotiations over the fiscal cliff – which caused consumer confidence/sentiment to plunge in December – did not adversely affect consumer spending behavior.

Excluding auto sales, retail sales increased 0.3% in December after falling 0.1% in November and were exactly in-line with the consensus estimate.

The retail sales report was strong across the board. With the exception of a small 0.6% decline in electronics and appliance stores -- which was likely due to slowing demand for the iPhone 5 after the initial release in late October -- and a 1.6% drop in sales at gasoline stations -- which was caused by lower prices and not weaker demand -- all of the retail sectors showed solid sales growth.

Core retail sales -- which exclude the highly volatile auto dealers, building materials and supply stores, and gasoline stations -- increased 0.6% in December and confirm strong consumer demand trends.