US retail sales surged in January, rising by 3%, the US Census Bureau reported on Wednesday.[0] This was the biggest monthly gain since March 2021 and well above the 1.8% estimate from Refinitiv economists. Excluding automobiles and gasoline, core retail sales rose by 2.6%, the largest increase in nearly two years.[1] This represents the largest gain in nearly two years and well exceeded economists’ expectations of a 1.8% month-to-month lift.
The value of overall retail purchases increased 3% in a broad advance, led by a surge in auto sales.[2] Total sales from November through January were also up 6.1% from the same period a year ago, while January sales were 6.4% higher than the same month in 2022.[3]
The strong retail sales numbers are a positive sign for the US economy, suggesting that consumer demand remains resilient despite a challenging macroeconomic environment.[4] The upbeat figures follow a 517k jobs created in January, beating forecasts of 185k jobs with ease, and a 0.5% increase in the consumer price index, which tracks price changes for a range of goods and services.[5]
The Federal Reserve has been hiking interest rate in an effort to cool the economy and ease inflation.[6] The interest rate peak for money markets is now predicted to be 4.55% by September, down from 4.69% prior to the CPI report.[7] The US dollar also gained, pushing the US dollar index (DXY) up 0.4% at 103.64.[7]
Meanwhile, Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, said: “The economy remains strong, unemployment is low, and that is what is going to keep inflation elevated. The Fed is going to need to raise rates higher — and hold them higher for longer — than people currently expect, and this is going to cause markets to go through some significant volatility as stock and bond markets are priced for benign scenarios and not the more difficult one that we are headed towards.”[8]
The Fed will look at these figures and see them as supportive of the central bank’s ongoing war against inflation and allow the Fed more wiggle room to keep rates higher for longer if they deem it necessary.[5] Investors should be aware of the risks associated with foreign exchange trading and seek advice from an independent financial or tax advisor if they have any questions.[5]
0. “Retail Sales Just Saw Their Biggest Gain in Almost 2 Years” The Motley Fool, 15 Feb. 2023, https://www.fool.com/the-ascent/personal-finance/articles/retail-sales-just-saw-their-biggest-gain-in-almost-2-years/
1. “US Retail Sales Jump 3% In January As Inflation Continues To Fall: What Investors Need To Know – SPDR S&P” Benzinga, 15 Feb. 2023, https://www.benzinga.com/news/23/02/30923643/us-retail-sales-climbed-3-in-january-as-inflation-continues-to-fall-what-investors-need-to-know
2. “US Retail Sales Jump by Most in Nearly Two Years in Broad Gain” Bloomberg, 15 Feb. 2023, https://www.bloomberg.com/news/articles/2023-02-15/us-retail-sales-jump-by-most-in-nearly-two-years-in-broad-gain
3. “U.S. retail sales jump 3% despite inflationary pressures” UPI News, 15 Feb. 2023, https://www.upi.com/Top_News/US/2023/02/15/retail-sales-January-2023/2691676472999/
4. “Retail Sales Surged in January. That’s Bad for the Fed.” Barron’s, 15 Feb. 2023, https://www.barrons.com/articles/january-us-retail-sales-report-today-194c7e25
5. “US Retail Sales Beat Expectations, US Dollar (DXY) Continues to Move Higher” DailyFX, 15 Feb. 2023, https://www.dailyfx.com/news/us-retail-sales-beat-expectations-us-dollar-dxy-continues-to-move-higher-20230215.html
6. “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
7. “FTSE 100 stays higher after softer UK inflation; Wall Street seen lower after rise in US retail sales” Proactive Investors UK, 15 Feb. 2023, https://www.proactiveinvestors.co.uk/companies/news/1006208/ftse-100-stays-higher-after-softer-uk-inflation-wall-street-seen-lower-after-rise-in-us-retail-sales-1006208.html
8. “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