According to Bloomberg News, US retail sales bounced back by more than predicted, manifesting the biggest gains since March, implying demand despite rising inflation.
In January, the overall purchase value surged by 3.8% following a downward figure revision of 2.5% drop in the previous month, as per the figures released by Commerce Department on Wednesday. However, the figures are not adjusted for inflation, and the Bloomberg survey called for a 2% advance in retail sales if taken in entirety from the earlier months in median estimates.
The broad-based sales advance underscores a consistent appetite for furniture and cars. While it is anticipated that the omicron variant and surge in Covid-19 infections ruined the spirits and spending in the month, there is an upswing in the labor market that has assisted consumers in continuing their spending habits despite prevailing inflation a decade-high.
Eight out of the 13 retail categories were found to be rising in the month. At the non-store retailers, sales escalated to 14.5%, after manifesting a drop in December. The sale of motor vehicles surged by 5.7%, following a decline in the previous month. A solid sale advance was posted by the home furnishing stores as well.
Bloomberg News reports that the stellar performance of retail sales in January is after a noticeable revision downwards to reading in December, thereby suggesting that consumers were hit more in comparison to previously assessed by Covid wave and that the recovery was quite fast, as per Bloomberg economists Andrew Husby and Yelena Shulyatyeva as stated in a note.
Impact of Growth
Receipts at bars and restaurants, the only service-oriented category, dropped by 0.9%, likely reflecting a record surge in coronavirus infection in January. Data related to inflation adjustment, personal spending, and overall spending in services will be released next week, reflecting a bigger picture of consumer outlays.
Before the report, economists projected US economic growth to become sluggish to an annualized 1.7% in the first quarter, a sharp deceleration from 6.9% as seen in the last three months of 2021. The report may show a stronger than anticipated situation, compelling economists to revise the estimates even higher.
However, the child credit payments’ expiration program, one which entitled every child to receive up to $300 per child every month, presents a headwind to grow in the nearer term adding to inflation and coronavirus infection.
Excepting motor vehicles, retail sales surged by 3.3%, adding to all expectations. The control group sales, which is used to calculate gross domestic product and does not include auto dealers, food services, gasoline stations, and building materials stores, escalated by 4.8%, which is also the strongest since March.
