The numbers: Sales at U.S. retailers such as Amazon and Best Buy jumped 3.8% in January as Americans bought more cars, furniture, consumer electronics and the like in a good sign for the economy.
The increase in sales was the largest since last March, when Americans spent a good chunk of their stimulus money from the government. A rapid decline in omicron cases likely abetted the increase in spending, as did a shift in spending toward goods from services.
Economists polled by The Wall Street Journal had forecast a 2.1% gain.
Some economists caution against extrapolating too much from the strong January retail report. They point out that sales snapped back after a steep 2.5% drop in December.
What’s more, retail sales have shown a pattern of surging in January after declining in December going back to 2018. That suggests problems with the government’s process of adjusting sales for seasonal swings during and after the holiday season.
Rapidly rising prices for gas, food, new cars and so forth, meanwhile, appear to have only played a small part in the increase in sales last month.
Consumer prices rose 0.6% in January, but the inflation-adjusted increase in retail sales was still quite large.
Retail sales are a big part of consumer spending and offer clues on the strength of the U.S. economy.
Big picture: Americans are generally in good financial health. Savings are high, wages and salaries are rising at the fastest pace in decades and most people feel secure in their jobs.
Yet high inflation threatens to sap their buying power, discourage them from making as many purchases and even endanger the economy.
The Federal Reserve is plotting to raise interest rates to choke off inflation, but the central bank has often choked off economic growth in doing so. The Fed has to perform a delicate high-wire act.
Key details: Sales jump 5.7% at car dealers in January and rose sharply for the second month in a row, the government said Wednesday.
Demand for new vehicles is still quite strong despite record high prices and struggles by manufacturers to produce enough cars and trucks. A chip shortage has curtailed production.
Auto sales account for about one-fifth of overall retail spending. Setting cars aside, retail sales still advanced a strong 3.3% last month.
Sales also rose sharply at Internet retailers (14.5%), furniture stores (7.2%), department stores (9.2%) and home centers (4.1%).
The only retailers to record a notable decline in sales were gas stations and restaurants.
The cost of fuel fell last month, though it’s starting to rise again. And restaurants suffered a drop in sales because of the omicron wave.
The retail figures are seasonally adjusted.
Looking ahead: “The strong 3.8% rebound in retail sales in January is not quite as good as it looks, since it is mainly a recovery from the revised 2.5% drop in December,” said Michael Pearce, Senior U.S. economist at Capital Economics.
“The seasonal adjustment looks way off [and] likely altered with the pandemic,” said chief economist Scott Brown of Raymond James. “Nevertheless, the underlying trend in retail sales appears strong.”
Market reaction: The Dow Jones Industrial Average
DJIA,
and S&P 500
SPX,
were set to open lower in Wednesday trades.
