Holiday sales beat expectations

WASHINGTON - Consumers snapped up flat-screen televisions and the latest electronic gadgets at a frenzied pace in December, helping retailers close out 2006 with better-than-expected sales.

The strong showing during the holiday season and a big jump in consumer confidence in January lifted hopes that the economy, after enduring a sluggish period in 2006, has begun to rebound.

Retail sales rose 0.9 percent in December, the best showing in five months, the Commerce Department reported yesterday. That was better than the 0.7 percent analysts had been expecting.

"It turned out to be a very merry Christmas for retailers. Consumers were out spending aggressively," said Mark Zandi, chief economist at Moody's Economy.com in West Chester, Pa. "It is surprising just how resilient consumers are in the face of a severe housing crunch."

In a good sign for 2007 prospects, a survey released yesterday showed that consumer confidence shot up in January as worries about soaring energy prices and a slumping housing market appeared to be easing.

The RBC Cash Index, based on results of the international polling firm Ipsos, showed consumer confidence increased to 95.3 in early January, the best showing in 11 months and up from a December reading of 86.9

While the warmer-than-normal weather had been blamed for depressing sales of winter clothing, it encouraged shoppers to get out to the malls and auto showrooms.

Auto sales, flat in November, rose by 0.3 percent in December, while sales at electronic and appliance stores surged by 3 percent following an even bigger 5.8 percent jump in November.

Those increases reflected heavy demand for flat-screen televisions and sought-after video game consoles such as Sony's Playstation 3 and Nintendo's Wii. That strength offset the weakness in sales of appliances due to the slump in home sales.

Consumer spending accounts for two-thirds of total economic activity. Because of the strength, analysts said the Federal Reserve was likely to keep interest rates unchanged until midyear, dashing hopes in financial markets for quicker rate cuts. Lower rates are good for stocks because they reduce companies' borrowing costs, boosting profit.

December sales were up 3.8 percent at gasoline stations, reflecting in part higher pump prices during the month. Those gains still left pump prices below the $3-plus records set last summer.

Excluding the volatile gasoline and auto sectors, retail sales would have risen by 0.7 percent in December, the best showing since January 2006.

The 0.9 percent overall gain pushed retail sales to a seasonally adjusted total of $369.9 billion in December after a 0.6 percent November increase, which had originally been reported as a stronger 1 percent gain.

Strong December sales made 2006 better than expected for retailers.

Type Change from

of storeNovember

Gasoline stations +3.8%

Electronics and+3.0

appliances

All retail sales +0.9

Department stores +0.9

Food/beverages+0.7

Furniture and+0.7

home furnishings

Specialty clothing +0.6

Automobiles/parts +0.3

Sporting goods, -0.1

music

Hardware/garden -1.1

Total 2006 retail sales

$4.4 trillion, up 6.0 percent from 2005.

SOURCE: U.S. Census Bureau.

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