Holiday sales from November 1 through December 31 rose 5.5 percent over the same period in 2016, to $691.9 billion. The industry has been under pressure as shoppers can buy sporting goods in big box stores and online. stock is down roughly 43 percent since December 2016.
Excluding auto sales, retail sales still rose by 0.4% in December after jumping by 1.3% in November. General merchandise sales rose 0.1% from November and were up 4.4% for 2017, and department store sales fell 1.1% from November and rose 0.5% year over year.
"The improving labor market, robust consumer confidence and the imminent boost to disposable incomes from the recently-enacted tax cuts suggest that spending will continue to grow at a healthy pace over the first half of this year", said Andrew Hunter, an economist at Capital Economics. Spending was up at furniture sellers, grocery stores and restaurants.
Electronics and appliance stores rose 6.7 percent. Clothing and accessories managed a 2.4% increase.
Health and personal care stores rose 2.2 percent.
The strength in the sector comes following the retail sales data as well as a report from the National Retail Federation showing stronger than expected holiday sales growth.
"We knew going in that retailers were going to have a good holiday season but the results are even better than anything we could have hoped for", NRF President and CEO Matthew Shay said.
Economists had expected retail sales to rise by 0.4% compared to the 0.8% increase originally reported for the previous month. The Dow is up 189.41 points or 0.7 percent at 25,764.14, the Nasdaq is up 33.91 points or 0.5 percent at 7,245.68 and the S&P 500 is up 14.56 points or 0.5 percent at 2,782.12.
With the optimistic outlook for consumer spending, Fed officials expected the USA economy to grow 2.5 percent this year, an upgrade of 2.1 percent from their forecasts in September last year. Consumer spending, which makes up for over two-thirds of US economic activity, increased at a 2.2 percent annualized rate for the third quarter.
For decades, the holiday season has been a critical time for the nation's retailers, and analysts said that was particularly true in 2017. "Overall, the underlying secular trends remain with the fast-growing e-commerce sector".