U.S. Retail Sales Surge in January Despite Inflationary Pressure

U.S. retail sales surged in January, posting the biggest monthly gain in nearly two years.[0] According to new numbers from the Commerce Department, seasonally adjusted retail sales rose 3.0% on a monthly basis to $697 billion, rebounding from a decline of 1.1% in December.[1] It was anticipated by economists that the number would increase by 1.8%.[2]

Retail sales rose 6.4% compared to the previous year, precisely corresponding to the consumer price index change reported on Tuesday.[3] The report stated that, apart from automobiles, sales increased by 2.3%, not taking inflation into account.[3] An estimate of a 0.9% increase was projected for the ex[3]

In May 2021, expenditure at pubs and eateries rose by 7.2%, the highest monthly surge since March 2021, while automobile sales grew by 5.9%.[4] Retail sales in January, not adjusted for seasonality, increased by 6.7% compared to the same month of the previous year, following a 5.1% jump in December.[4]

In January, the consumer-price index rose 6.4% as compared to the same period in the previous year, a slight decrease from December’s 6.5%, but still far exceeding the Federal Reserve’s 2% inflation goal.[1] In an attempt to stifle economic growth and reduce inflation, the Federal Reserve has been increasing interest rates.[5] Investors are worried that if interest rates go too high, it could lead to a recession in the U.S., and are hoping the Federal Reserve will not increase rates in 2019.[5]

It is currently anticipated that the Federal Reserve will raise interest rates by a quarter of a percent at their next two meetings, and then pause to evaluate the effects that their monetary policy choices have on inflation, employment, and the state of the economy overall.[3]

The confidence in the economy has not been reflected in increased spending by Americans.[6] Due to necessity, they have increased their expenditures.[6] This is an unplanned spending spree.[6] American consumers are spending lavishly in an attempt to keep up with rising prices.[6] They are not obtaining additional items.[6] They are spending more money for the same items they had previously, and in some cases, even fewer items.[6]

Overall, the retail sales report suggests that consumer spending was strong last month despite rising inflation.[4] Combined with Tuesday’s inflation data, it appears that American consumers are persevering in the face of macroeconomic pressures.

0. “Retail sales jumped by 3% in January, the biggest gain in nearly two years” CNN, 15 Feb. 2023, https://www.cnn.com/2023/02/15/economy/retail-sales-january/index.html

1. “U.S. Retail Sales Rose Sharply in January” msnNOW, 15 Feb. 2023, https://www.msn.com/en-us/money/markets/us-retail-sales-rose-sharply-in-january/ar-AA17vjgb

2. “U.S. retail sales climb by 3.0% in January By Investing.com” Investing.com, 15 Feb. 2023, https://www.investing.com/news/economic-indicators/us-retail-sales-climb-by-30-in-january-3004176

3. “Retail sales jump 3% in January, smashing expectations despite inflation increase” CNBC, 15 Feb. 2023, https://www.cnbc.com/2023/02/15/retail-sales-january-2023-.html

4. “Stock Market Today: Stocks Close Up After Strong Retail Sales Data” Kiplinger’s Personal Finance, 15 Feb. 2023, https://www.kiplinger.com/investing/stocks/stock-market-today-021523-stocks-close-up-after-strong-retail-sales-data

5. “Treasury yields rise as investors digest latest retail sales, inflation data” CNBC, 15 Feb. 2023, https://www.cnbc.com/2023/02/15/us-treasury-yields-investors-digest-latest-inflation-data.html

6. “The Dark Side of January’s Big Retail Sales Print” SchiffGold, 16 Feb. 2023, https://schiffgold.com/key-gold-news/the-dark-side-of-januarys-big-retail-sales-print/