December's surprise decline could temper expectations that consumer spending, which accounts for more than two-thirds of U.S. economic activity, accelerated sharply in the fourth quarter.
But with the labor market strengthening and gasoline prices continuing to fall, December's decline in core retail sales will likely be temporary.
Core sales last month were weighed down by a 1.6 percent decline in receipts at electronic and appliance stores, as well as a 0.3 percent fall in sales at clothing stores. Online sales slipped 0.3 percent.
There were also declines in receipts at sporting goods stores.
Core sales were up 3.2 percent from a year earlier.
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Receipts at furniture stores rose 0.8 percent in December.
Elsewhere, declining gasoline prices weighed on service station sales, with receipts falling 6.5 percent - the biggest decline since December 2008.
That decline combined with a 0.7 percent fall in receipts at auto dealerships to push down overall retail sales 0.9 percent, the largest decline since January last year.
November retail sales were revised down to show a 0.4 percent increase instead of the previously reported 0.7 percent advance.
Sales for building materials and garden equipment fell 1.9 percent in December, while sales at restaurants and bars rose 0.8 percent.