CHICAGO, IL -- (Marketwire) -- 01/15/13 --

• U.S. retail sales rose 0.5 percent in December
• Producer prices fell for a third straight month
• Empire State Manufacturing Index worsens in January

Despite looming tax increases, U.S. consumers ended last year on a high note, but some manufacturers got off to a rocky start in the New Year. Meantime, nationwide producer prices remain in check, according to BMO Economics.

"U.S. retail sales rose a larger-than-expected 0.5 percent in December following an upwardly-revised 0.4 percent advance in November, as aggressive discounting spurred a pickup in sales through the holiday season," said Sal Guatieri, Senior Economist, BMO Capital Markets. Leading the gain were motor vehicles, furniture and clothing. Discretionary spending (e.g., restaurant outings) is also picking up.

2013 should continue to see improvement in consumer spending according to Guatieri, "Although consumer spending will likely stumble in the current quarter due to higher payroll and income taxes, it should strengthen to a 3 percent average rate in the second half of the year on improved household finances, pent-up demand and housing-related purchases."

On the inflation front, producer prices fell for a third straight month in December by 0.2 percent. Lower energy prices were assisted by a surprising drop in food costs. The monthly decline lowered the yearly rate to 1.3 percent. Core prices rose a modest 0.1 percent month over month, reducing the yearly rate two notches to 2.0 percent. While prices in earlier stages of production have turned higher recently, they remain in check. Core intermediate prices are up just 0.7 percent year over year, while core crude prices are still down 1.4 percent.

Not all recent metrics are positive. The Empire State Manufacturing Index -- an economic indicator for one of the most populous states in the country -- worsened in January, easing to -7.78, the sixth straight month in negative territory. Some rebound was expected following the fiscal-cliff deal. However, according to Guatieri, "If consumer spending picks up this year, manufacturing will follow." Overall, two good reports out of three isn't bad.