Holiday sales rose to $691.9 billion in November and December, marking a 5.5 percent increase from the year before, according to the National Retail Federation.
The retail and food services sales increased 0.4 percent from the previous month in December, said the U.S. Commerce Department on Friday.
Excluding auto sales, retail sales still rose by 0.4% in December after jumping by 1.3% in November.
The results topped NRF's forecast of holiday sales between $678.75 billion and $682 billion representing an increase of between 3.6% and 4%.
All key retail sectors except sporting goods saw increases during the month, according to government records. The results mean retail sales grew 4.2% in 2017, the most since 2014.
At J.C. Penney, meantime, even an optimistic outlook from CEO Marvin Ellison couldn't buoy the retailer's shares after investors were underwhelmed by the company's 3.4 percent gain for holiday sales.
Fed officials expected the tax cuts approved by the U.S. Congress would provide "some boost" to consumer spending. The organization credits low unemployment, strong consumer confidence, a rising stock market and income raises for the showing.
Ahead of Friday's report, Macroeconomic Advisers, a forecasting firm, estimated the economy grew at a 2.3% annual pace in the October-to-December period. "Today's strong report raised our estimate of Q4 GDP growth three-tenths to 2.6% (revised up further to 2.7% after folding in this morning's CPI report) and our forecast of Q1 GDP growth two-tenths to 2.4%". Fluctuations in sales often reflect changes in gas prices, not volume.
December's retail sales growth shows "the dire predictions of the demise of retail are premature", Moody's vice president Mickey Chadha said.
Sales were uneven across other categories last month.
"The Dec details show robust increase in furniture, building materials, and non-store retailers, while department stores did badly, with sales down 1.1%". Home furnishings and electronics/appliance stores came in just below at 7.5% and 6.1%, respectively.
Sales at department stores fell 1.1% last month but were up 0.5% from December 2016.
While strong sales were widely expected, many retailers were particularly hungry to prove themselves this past holiday season, following a year marred by tumbling stock prices, management shakeups, a slew of store closures and several industry bankruptcies.