US consumer spending as measured by core retail sales appears to have regained some momentum according to data published by the US Commerce Department last Friday.

After posting an upwardly revised 0.2% gain in December, retail sales excluding cars, gas, building materials and food services rose by another 0.2% against expectations for a 0.1% increase. Growth in consumer spending eased in 4th quarter of last year leading many to forecast that the economy was heading for recession but the retail sales data appears to support hopes that the consumer has returned.

“It would be foolish to read too much into one month’s data particularly as the read for December was so damning given the time of year,” said Harry Coolidge, a senior economist at Mizuho Corporate Global. “December hosts Thanksgiving, Christmas and New Year as well as any number of retail events like Black Friday, Cyber Monday etc. If retail sales can’t delight economists in December, there’s a big underlying problem with the economy that, this year at any rate, can’t be explained away by blaming cold weather since, with the exception of the recent snowstorm on the East Coast, the winter has been relatively mild.”

Consumer spending, which represents some 70% of the US’s $16 trillion economy, has been challenged by low wage growth and a shortage of high-paying new jobs to replace those lost in the energy and manufacturing sectors.

Even the boost to incomes provided by low gasoline prices has failed to lift spending leading many commentators, including Mizuho Corporate Global, to raise the odds of a US economic recession in 2016.
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