WASHINGTON, Feb 16: US retail sales rebounded sharply in January amid a surge in purchases of motor vehicles and other goods, but higher prices could blunt the impact on economic growth this quarter, reports Reuters.
Data for December was, however, revised sharply lower, taking some shine off last month's spectacular performance. Still, the report from the Commerce Department on Wednesday showed underlying strength in the economy ahead of anticipated interest rate hikes from the Federal Reserve starting in March.
"The strong rebound in January retail sales, though partly in response to last year's weak finish and inflated by higher prices, suggests consumers still have plenty in the tank to propel the expansion forward this year," said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. "Rate hikes won't cool their jets for a while, making the Fed's job of driving down inflation that much harder."
Retail sales surged 3.8 per cent last month. Data for December was revised down to show sales declining 2.5 per cent instead of 1.9 per cent as previously reported. Economists polled by Reuters had forecast retail sales would rise 2.0 per cent, with estimates ranging from as low as 0.7 per cent to as high as 4.4 per cent.
Retail sales increased despite consumer sentiment sagging in recent months. The broad increase in sales was led by motor vehicles. Auto sales typically drop in January after the holiday promotional season. The decline last month was probably not as large as in prior years or did not happen because of a lack of supply, caused by a global shortage of semiconductors.
That likely resulted in the seasonal factors, the model used by the government to iron out seasonal fluctuations in data, being more generous than in previous years. Economists expect this boost to fade in March.
Retail sales last month were also lifted by higher prices because of shortages amid strained supply chains. Retail sales are mostly made up of goods and are not adjusted for inflation.
Receipts at auto dealerships snapped back 5.7 per cent after dropping 1.6 per cent in December. Sales at electronics and appliance stores increased 1.9 per cent. Receipts at food and beverage stores rose 1.1 per cent. Building materials stores sales surged 4.1 per cent.
But receipts at sporting goods, hobby, musical instrument and book stores fell 3.0 per cent, suggesting consumers were cutting back on discretionary spending likely because of inflation.
Sales at service stations fell 1.3 per cent amid lower gasoline prices. Sales at clothing stores rose 0.7 per cent. Receipts at restaurants and bars dropped 0.9 per cent as Covid-19 infections, driven by the Omicron variant, reduced mobility. Restaurants and bars are the only services category in the retail sales report.
Online retail store sales surged 14.5 per cent.
Excluding automobiles, gasoline, building materials and food services, retail sales soared 4.8 per cent in January. Data for December was revised lower to show these so-called core retail sales falling 4.0 per cent instead of 3.1 per cent as previously reported.
Core retail sales correspond most closely with the consumer spending component of gross domestic product.
With higher prices accounting for part of the increase in sales, inflation-adjusted core retail sales were probably weaker, which could keep consumer spending on a slower growth path at the start of the first quarter.
The so-called real core retail sales are what matter in the measurement of consumer spending growth. Real consumer spending declined 1.0 per cent in December.
