Retail sales, helped by sizzling activity in auto showrooms, jumped by 1.2 percent in December, providing a solid finish to a year in which sales climbed at the fastest pace this decade.

The Commerce Department (search) reported that the December increase, which pushed total spending for the month to $349.4 billion, was far above the small 0.1 percent gain recorded in November. It was the best showing since a 1.6 percent surge in September.

For the year, retail sales climbed a solid 8 percent, the best performance since an 8.5 percent rise in 1999. Sales had been up 5.4 percent in 2003.

Both years were well above the lackluster gains of 2.9 percent in 2001 and 2.5 percent in 2002 when the country was struggling to deal with the first recession in a decade, the Sept. 11 terrorist attacks and a weak recovery from the downturn.

The 1.2 percent jump in sales on a seasonally adjusted basis in December showed that retailers did indeed have a solid Christmas sales season (search), helped by a surge of shopping just before and after the holiday.

The gains were led by a 4.3 percent jump in auto sales, the best showing since a similar increase in September, as dealers turned to enhanced incentives to move cars out of showrooms. Sales in December came in at an annual pace of 18.4 million units, the best showing for the entire year.

In a second report, the Labor Department (search) said that the number of Americans filing new claims for unemployment benefits rose by 10,000 last week to a three-month high of 367,000. The four-week moving average, which smooths out weekly fluctuations, rose to a three-month high as well of 344,000.

Even with last week's increase in jobless claims, analysts are optimistic about the labor market, pointing to a string of solid gains in payroll growth in recent months.

Analysts believe the economy finished the year on a solid note with economic growth of around 4 percent, capping an entire year that showed the recovery from the 2001 recession was gaining a solid footing.

Excluding autos, retail sales were up 0.3 percent in December, down slightly from a 0.4 percent increase in sales outside of autos during November.

The standout performers outside of autos included furniture and home furnishings stores, where sales jumped by 2.2 percent, the best gain since June, reflecting the fact that the housing industry remained red hot throughout the year. Sales were also strong at sporting goods, hobby and book stores which posted a 0.9 percent increase, the best showing since a 1.3 percent gain in July.

General merchandise stores, a category that includes department stores, saw sales rise by 0.7 percent, up from a 0.4 percent gain in November and the best showing since October. Sales at department stores alone posted a 0.2 percent increase.

Analysts believe consumer spending, which accounts for two-thirds of total economic activity, will remain strong in 2005, helped by continued improvement in job growth.