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Modest Bump Up in Retail Sales at End of 2012

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That America avoided the fiscal cliff was one major piece of good news for the national economy. However, the latest government data pertaining to retail and food sales in the final month of 2012 brought another dose of optimism.

According to the Commerce Department, retail and food sales hiked 0.5 percent on a seasonally adjusted basis. The projected increase in sales, according to economists interviewed by MarketWatch, was 0.2 percent.

Total spending came in at around $415 billion for December, the government report shows. Overall, spending on retail and food in 2012 was 5 percent better than in 2011.

The monthly bump in sales was the largest since September of last year, and may indicate consumers’ personal finances were in better standing entering the new year.

However, with payroll tax increases implemented across the country at the start of 2013, many consumers are seeing dwindling paychecks. In turn, this may lead to a drop in spending in the first months of the year.

“As consumers adjust to their lower take-home pay, spending will likely slow in the first half of 2013,” said senior economist Eugenio Aleman of Wells Fargo, according to MarketWatch.

One major factor that will affect spending this year, other economists note, is the unemployment rate. Until the rate drops lower than its current level of 7.8 percent, spending is likely to lag, according to the news source.

One consumer sentiment index notes the level of optimism in the market dwindled to start 2013. The Thomson Reuters/University of Michigan index of consumer sentiment declined to 71.3 in January — a marked drop from 72.9 in December. Additionally, the latest index is the lowest one recorded by the entities in just over a year.

Image: Ed Sweeney, via Flickr

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