Retail sales surge 3% in January despite stubbornly high inflation
Sales post biggest monthly gain since March 2021 as consumers continue to spend
Inflation Insights founder Omair Sharif and Kaltbaum Capital Management founder Gary Kaltbaum react to the hotter-than-expected January CPI report and what it means for future Fed rate hikes on 'The Claman Countdown.'
Spending at retail stores rose more than expected in January as consumer demand remains strong even in the face of stubbornly high inflation and rising interest rates.
Retail sales, a measure of how much consumers spent on a number of everyday goods, including cars, food and gasoline, rose 3% in January, the Commerce Department said Wednesday. That is well above the 1.8% estimate from Refinitiv economists and a major improvement from December, when sales tumbled 1.1%.
It marked the biggest monthly jump since March 2021; all of the categories – including food and drinking places, motor vehicles, furniture and personal care stores – posted an increase last month.
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Bloomingdale's department store in the SoHo neighborhood of New York, U.S., on Sunday, Oct. 24, 2021. (Nina Westervelt/Bloomberg via Getty Images / Getty Images)
The surprise increase in retail sales "speaks to the resilience of the consumer despite higher prices, interest rate increases, and the uncertainty of the macroeconomic environment," said Mickey Chadha, Moody's vice president. "The strength of the labor market as attested by the strong jobs report for January with unemployment being at record low is a big driver of this consumer resilience as consumers are comfortable spending if they have a steady stream of income."
Food services and drinking places accounted for the biggest gain in January, with sales surging 7.2% last month. Motor vehicles and parts dealers, meanwhile, rose 5.9%, even as higher interest rates made the price of purchasing a new car even more expensive. Sales at furniture and home furnishing stores saw a rise 4.4%.
When excluding spending on autos, sales rose 2.3% last month.
Shoppers walk through a store at Tysons Corner Mall in Tysons, Virginia, on April 2, 2022. ((Photo by STEFANI REYNOLDS/AFP via Getty Images) / Getty Images)
Markets moved lower after the report amid fears the Federal Reserve will have to continue its aggressive interest-rate hike campaign as it seeks to cool the economy and wrangle inflation back to 2%. Policymakers raised the key interest rate in January for the eighth straight time and indicated that additional hikes are on the table this year.
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Rising interest rates could force consumers to pull back on spending.