NEW YORK (CNNMoney.com) - Year-end incentives on cars and steep discounts on clothing and accessories, sporting goods and other popular holiday gift merchandise helped spur overall retail sales last month, although the smaller-than-expected rise was partially offset by a strong revision to the November sales number.

The Commerce Department said Friday that sales for December increased 0.7 percent, compared with a revised 0.8 percent gain in November. Retail sales initially were reported to have increased 0.3 percent in November.

Excluding autos, which account for about a quarter of total sales and can fluctuate widely from month to month, sales rose 0.2 percent last month, compared with a 0.3 percent decline in November.

Economists, on average, had expected total sales to rise 1 percent and sales excluding autos to rise 0.4 percent, according to Briefing.com.

As was widely expected, consumers continued to flock to dealerships last month to take advantage of discounts and other auto incentives. However, December's increase wasn't enough to match November's sales surge.

Car sales last month cooled to 2.6 percent versus a strong 5.7 percent gain the previous month. Sales at gasoline stations increased 0.9 percent after sagging 6.1 percent the previous month.

Outside of autos, clothing sales were flat versus the previous month, while sales of sporting goods, books and music CDs and DVDs rose 1.5 percent.

Sales of electronics slipped 0.1 percent and department store sales suffered a 1.5 percent decline.

"The weakness in electronics was more a function of supply rather than demand issues," said Steve Cochrane, economist with Economy.com. "Retailers saw a shortage of popular holiday items like the Xbox and the iPod. Sales would've been stronger if retailers had more of these products on their shelves."

Total sales for 2005 increased 7.3 percent, the government reported, falling below the 7.6 percent gain seen in 2004. Excluding auto sales, sales for the year rose 8.3 percent.

Cochrane said the annual number was about in-line with his expectations. "The first half of 2005 was a bit slower in terms of retail sales but the pace picked up in the second half," he said.

Looking forward to this year, Cochrane said consumer spending should hold in the first half, supported by a stronger labor market and growth in average wages.

But watch out for the second half, he cautioned. "Rising interest rates may cut off consumers' ability to tap into their home equity and use the money to shop.

"Higher interest rates also mean credit card bills will be higher," he added. "Also, people have to keep in mind that new federal regulations that kick in this year allow credit card companies to hike the minimum balance on payments."