Retail sales in December 2014 fell surprisingly sharply, sliding by 0.9% on the previous month. Core retail sales (excluding automotive dealers and building materials), used to calculate private consumer spending on goods in the national accounts, were also down by a similar amount on their November level. But key to economic growth is the price-adjusted figure. As goods prices are likely to have continued to fall sharply in December on the back of the ongoing steep drop in gasoline prices along with a renewed decline in import prices for consumer goods, in real terms a moderate increase looks likely. Taking the slight dip in car sales into account, goods consumption is likely to have contributed 0.1-0.2 percentage points towards growth in real consumer spending.
Against this backdrop and taking into account the revision of the retail sales data for October and November, we expect real consumption growth to have firmed up to 3.5%-3.75% (annualized) in the final quarter of 2014, after 3.2% in the third quarter.