Consumer spending is the engine that drives the mechanism of recovery. Retail (NYSEARCA:XRT) sales for December rose by 0.1%, but an increase of 0.4% had been the consensus forecast. If auto sales are removed, the December statistic goes negative with a 0.2% drop. However it is encouraging to note that December 2011 sales are up 6.5% from one year ago; comparing that number with the forecast deficit of 0.3% puts some perspective into the situation.

Another forecast, more of a general nature, is that consumer sales would slow down at the beginning of 2012. December figures can be extrapolated to support this but there are some mixed signals available to help assuage the darker possibility. Jobless benefits claims increased last week – no surprise for the first week after the Holidays – but not as much as expected, some 6,000 fewer. This could signal that the January labor market might be stronger than we have seen in the same period in recent years. Also, 2011 retailers had their strongest sales year since 1999. December might have been disappointing but that should not negate the entire year’s figures.

In particular, auto sales were up in December by 1.5%. Sales of big ticket items is a barometer of consumer confidence and that confidence is vital to maintaining an economic recovery. Auto sales could have been and probably were aided by lower gas prices and a warm December, but if they were also abetted by better economic situations and expectations on the part of the buyers, then that would be as important indicator for the future as the sales themselves.

One statistic to watch this month is the Consumer Confidence Index. This measures the confidence on the part of consumers and reads their sense and expectations of well being. December’s index was 64.5 (1985 = 100), up from 55.2 in November, a fairly large jump. If accurate, this could indicate that consumers spent less so as to increase their savings, pay off debt, or for other personal reasons, but not because they were more fearful of the future, which would be the reason that economists most dread. The January CCI will be released on the 31 and it should provide far more clarification on this situation.

To contact the reporter on this story: Mark Lawson at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com

Get Your FREE Special Report: 4 Things You Must Know About the US Economy Now!