The US Congress has reached an agreement with the White House to avoid the "fiscal cliff", a combination of tax increases and across-the-board spending cuts set to come into effect from the beginning of January, which were threatening to push the country into recession.

According to statistics from the National Retail Federation (NRF), if the tax hikes and spending cuts that make up the fiscal cliff had been allowed to go through, retail sales would have been flat for the year, with negative growth for the first half of the year.

A White House report in November said consumer spending would have taken a hit of nearly US$200bn in 2013 if middle-class tax cuts were allowed to expire.

"If our nation had been allowed to go over the fiscal cliff, the consequences would have been devastating for businesses and consumers alike," said NRF president and CEO Matthew Shay.

"With the economy still recovering, taking hundreds of billions of dollars out of consumers' hands was a risk we could not afford to take. This agreement might not be seen as perfect by everyone, but it gives American consumers and businesses the certainty they need to put worries over this issue behind them and get on with the business of growing our economy and creating jobs. We urge Congress and the White House to move as quickly as possible to get it passed and signed into law."

However he warned that the Administration and Congress still need to develop long term plans dealing with tax reform and other fiscal issues.

"We have avoided the immediate crisis, but there's much more to be done before our economy is fully restored," emphasised Shay.

The agreement will see the wealthiest 2% of Americans pay more, while preventing the other 98% of families and 97% of small businesses from any income tax increase - raising $620bn in revenue.

The deal will see a permanent extension to the middle-class tax cuts, while extending credits for working families and additional measures to protect families and promote economic growth, the White House said.

However, President Barack Obama admitted last night (1 January) that there is still more work to be done to reduce the country's financial deficit.

"There's more work to do to reduce our deficits, and I'm willing to do it," he said.

"But tonight's agreement ensures that, going forward, we will continue to reduce the deficit through a combination of new spending cuts and new revenues from the wealthiest Americans. And as we address our ongoing fiscal challenges, I will continue to fight every day on behalf of the middle class and all those fighting to get into the middle class to forge an economy that grows from the middle out, not from the top down."