The federal government also revised its November estimates upward to 0.9% growth over October, from 0.8%.
Economists had expected retail sales to rise by 0.4 percent compared to the 0.8 percent increase originally reported for the previous month.
Consumer spending had been robust previous year thanks to the improved consumer confidence and strong labor market performance.
For example, after warning of a tough holiday Target reported that same-store sales in November and December grew 3.4%, Nordstrom said that net sales rose 2.5% and same-store sales rose 1.2% in that period, and teen apparel retailer American Eagle beat forecasts with a same-store holiday sales rise of 8%. It marked the fourth consecutive month of increase for the industry after a bruising year strewn with bankruptcies and department store closures largely from the shift to online shopping.
Core retail sales - excluding automobiles and parts - grew 0.4%. "Consumers are still buying, but where they are buying and how they are buying is changing and will continue to evolve as price transparency increases and e-commerce and brick-and-mortar operations of retailers continue to converge into one seamless consumer experience".
Consumer spending is the main engine of the USA economy, accounting for more than two-thirds of total economic output. "Overall, though, these data are consistent with the very elevated consumer confidence numbers, and they imply that the saving rate, which is already very low, continues to decline", said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
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As a result, certain retail segments were particularly strong in December.
Every retail category except for sporting goods showed gains during the final two months of the year, according to the NRF.
"The basic story line here is that holiday sales were extremely strong", said Chris Christopher, executive director of research firm IHS Markit.
Sales at gasoline stations were unchanged during December after growing 3.0% in November. Among the top 30 cities, Philadelphia ranked No. 12 in terms of total dollars spent in November and December.
"The Dec details show robust increase in furniture, building materials, and non-store retailers, while department stores did badly, with sales down 1.1%". Retailers closed a record 7,000 US stores a year ago, while dozens of big-name companies, including Gymboree, RadioShack and BCBG Max Azria, filed for bankruptcy.