U.S. consumers shopped at stores and online outlets at a solid pace in December, closing out a healthy holiday season for retailers.

The Commerce Department said Friday that retail sales rose 0.4% last month, after a 0.9% surge in November. Retail sales rose 4.2% in 2017, the most in three years.

Strong holiday shopping should lift economic growth in the final three months of last year. Americans have been more confident about the economy and are more willing to spend. Further, the unemployment rate is at a 17-year low of 4.1%.

Read: U.S. unemployment rate steady at 4-1% low

Sal Guatieri, senior economist for BMO, described it as “one of the best shopping seasons in years.” He said “households are well positioned to spend, spend, spend in the new year.”

“Today’s report solidifies our estimate of 3.1% annualized PCE growth in Q4 and 2.9% growth in real GDP, countering weakness in trade and inventories,” he said in the research note.

Guatieri also calls for a Fed hike in March, rather than in January, arguing the “Fed has little choice but to raise policy rates.”

CIBC’s Avery Shenfeld says both U.S. CPI and retail data “showed heat,” but he also cautions that one month doesn’t make a trend. Still, he says today’s data could lead to “upward adjustments to tracking estimates for Q4 GDP.” 

For the month of December, consumer inflation slowed in the U.S. There was a mere 0.1% gain, as energy costs retreated from a big jump in November.

Read: U.S. consumer inflation inched up in December, for more

The details

Online retailers reported a strong sales gain of 1.2% in December. Department and general merchandise stores, which include Macy’s as well as Target and warehouse clubs, saw sales rise by just 0.1%.

Sales at home and garden stores jumped 1.2% and increased 0.7% at restaurants and bars. A few sectors didn’t fare as well: sales fell 1.6% at sporting goods stores and 0.3% at clothing stores.

Consumer confidence reached a 17-year high in November, though it slid in December. Spending hasn’t risen as much as the increase in confidence would suggest.

Overall consumer spending, which includes spending on services as well as at retailers, increased 2.2% in the July-September quarter, after rising 3.3% in the April-June quarter. Those are solid figures but not much different from previous years. Overall consumer spending data for the fourth quarter hasn’t been released yet.

Still, Americans are lifting their spending faster than incomes are growing. That has lowered savings and lifted credit card debt. Figures from the Federal Reserve show that credit card debt reached a record high in December of $1.02 trillion, though that number isn’t adjusted for inflation.

The economy expanded at a 3.2% annual rate in the spring and summer, the first time growth topped 3% for two quarters since 2014. Economists forecast the economy expanded at a roughly 2.5% to 3% in the October-December quarter.

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