By Sabrina Escobar

December's retail sales report could be a bright spot for the economy, rounding out a surprisingly solid holiday season.

By all accounts, the sales report -- due Thursday morning at 8:30 a.m. Eastern -- should be a solid one. Economists polled by FactSet are expecting December's retail sales to rise by 0.55% from November.

November's sales report beat expectations, gaining 0.7% month over month thanks to a surge in online shopping and car sales. Sales at nonstore retailers -- often a proxy for online-only stores -- were 9.8% higher this year than last November, according to the latest retail sales report.

"Our broad takeaway is that the solid spending that we saw around Thanksgiving continued through Christmas week, especially in the online retail segment," wrote Aditya Bhave, U.S. economist at BofA Securities.

Indeed, many retailers have struck upbeat tones about their December performance. Costco Wholesale's net sales for December rose 9.9% year over year, with e-commerce sales up 34%. Lululemon Athletica, Abercrombie & Fitch, American Eagle Outfitters, and Nordstrom all raised their fiscal fourth-quarter revenue guidance over the past few days. Abercrombie and American Eagle both noted they had achieved record sales in December.

That said, don't expect Thursday's report to be a blowout one. As UBS analyst Michael Lasser points out, while many management teams provided "hopeful" commentary about a successful holiday season, the enthusiasm varied depending on the company and retail category. Macy's and Signet Jewelers, for instance, both said sales were softer than expected -- raising the question of whether the better-than-expected holiday sales were "an outlier or a trend," he added.

The diverging performance is indicative of how even though consumers have largely bucked concerns of a drastic pullback in spending, they have been more cautious with their outlays. The retail sales report should help fill in the gaps, providing a high-level perspective of the consumer economy.

The retail sales report comes a day after the Bureau of Labor Statistics released the consumer price index reading for December. Prices rose by 2.9% in December from a year ago, inching up from November's 2.7% reading and coming in hotter than the 2.8% economists were forecasting according to FactSet. The report all but guarantees that Federal Reserve officials will vote to hold interest rates steady when they meet later this month, investors and economists say. A solid reading on consumer spending -- coupled with last month's hotter-than-expected jobs report -- would likely firm up that resolve.

"The acceleration in December consumer prices will likely force investors to wait until the second quarter for the next cut in rates," said Jeffrey Roach, chief economist for LPL Financial. "If enough households remain on solid financial footing, the economy will continue to grow and keep inflation pressures elevated."

Write to Sabrina Escobar at sabrina.escobar@barrons.com

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January 15, 2025 16:30 ET (21:30 GMT)

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