Other data on Tuesday showed inflation pressures remained muted, with wholesale prices declining for a third straight month in December. That should allow the Federal Reserve to stay on its very easy monetary policy path to nurse the recovery.

Retail sales increased 0.5 percent after rising 0.4 percent in November, the Commerce Department said, beating economists' expectations for a gain of only 0.2 percent.

Consumers showed resilience even as the economy teetered on the edge of a so-called fiscal cliff -- $600 billion of automatic government spending cuts and tax increases that were scheduled to start kicking in at the beginning of this year.