US retail sales rebound sharply in January

WASHINGTON (Reuters) – US retail sales rose sharply in January after two consecutive monthly declines driven by purchases of cars and other goods, indicating that the economy remains resilient despite higher borrowing costs.

The Commerce Department said on Wednesday that retail sales rose 3.0% last month. December data was not revised and shows that sales fell 1.1% as previously reported.

Economists polled by Reuters had forecast sales to rise 1.8%, with estimates ranging from 0.5% to 3.0%. Some caution against overinterpreting the retail sales surge.

The drop in sales in the previous two months was due to a priority loading of holiday shopping, which economists say has not been fully adjusted by the model the government is using to de-season the data.

So-called seasonal adjustment factors likely weighed on retail sales in January. The sharp increase in the number of jobs in January was partly due to seasonal adjustment factors.

“The bottom line is that the underlying trend in consumption is not as weak as the December data suggests, but not as strong as the January data would suggest,” said Lou Crandall, chief economist at Wrightson ICAP.

Retail sales consist primarily of merchandise and are not adjusted for inflation. They were also spurred on by higher gasoline prices, which led to increased revenue at gas stations. But even with technical distortions, Americans still spend.

The Bank of America Institute last week reported a sharp increase in spending in January based on an analysis of Bank of America credit and debit card data. This suggests that “although lower income consumers are under pressure, they still have solid cash reserves and the ability to borrow”, noting that “even for the lowest income cohorts, this should provide support for some time.” “.

Citi card data also showed significant increases in service costs. Retail sales were also likely supported by the largest cost-of-living adjustment since 1981 for more than 65 million Social Security recipients, which went into effect in January. Several states have also raised the minimum wage.

The story goes on

A tight labor market continues to generate strong wage growth, although the pace has slowed. The Federal Reserve has raised the discount rate by 450 basis points since March last year from near zero to a range of 4.50% to 4.75%, with the bulk of the increase occurring between May and December. Two additional rate hikes of 25 basis points are expected in March and May.

Excluding cars, gasoline, building materials and catering, retail sales rose 1.7% last month. These so-called core retail sales fell an unrevised 0.7% in December.

Basic retail sales most closely match the consumer spending component of gross domestic product.

(Reporting by Lucia Muticani; editing by Andrea Ricci and Paul Simao)

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