In the final analysis, retail sales did not disappoint at the end of 2012. They rose .5%, the largest gain in three months.
Sales also rose in November more than previously thought with the number revised to up .4%.
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A separate report showed that wholesale prices (PPI) fell more than expected last month,
delivering the smallest monthly gain in four years.
Improvement in the job market, housing market, and lower fuel prices combined with discounts by large retailers will continue to encourage consumer spending.
The challenges of the first quarter of 2013 will have to do with adjusting to higher taxes and reduced paychecks. It does not mean the recovery will stall.
The payroll tax is expected to have little effect on spending but faster job growth is needed to shift spending to the next level.
The drop in producer prices means that inflation continues to be a non-concern
. This gives the Fed more room to stimulate economic growth and employment with no fear of instigating inflation.