Retail sales in the US have reached record highs, highlighting the main strengths of the economy

Retail sales in the U.S. rose more than 10 months in January, lifting sales to a record high amid rising purchases of cars and other goods, but higher prices could limit the boost to economic growth this quarter.

A report by the Commerce Department on Wednesday showed the main strength of the economy ahead of the expected rise in interest rates from the Federal Reserve since March, although retail sales in December were much weaker than originally expected.

“The strong rebound in January retail sales, although partly in response to last year’s weak end and high prices, suggests that consumers still have a lot to spare to advance this year,” said Sal Guateri, a senior economist. BMO. Capital Markets in Toronto. “Raising rates for a while will not cool their planes, which greatly complicates the Fed’s work to reduce inflation.”

Retail sales rose 3.8 percent last month, the biggest increase since March last year. This has raised sales to the highest level since the government began monitoring the series in 1992.

Data for December were revised downwards to show a 2.5 percent drop in sales instead of 1.9 percent as previously reported. Economists surveyed Reuters projected retail sales to grow 2.0 percent, with estimates ranging from 0.7 percent to 4.4 percent.

Retail sales have increased, despite consumer sentiment in recent months falling to a ten-year low.

Extensive sales growth led automotive technology.

Car sales usually fall in January after the holiday advertising season. Given the persistent shortage of vehicles due to the global shortage of semiconductors, the fall last month was probably smaller than expected due to seasonal factors, a model used by the government to smooth out seasonal data fluctuations.

This has probably led to seasonal factors becoming more generous than in previous years. Unadjusted car sales last month were the highest since January since 1992.

Economists expect this increase to disappear in March. Car sales may also fall, a separate Fed report on Wednesday said car production in January was declining for the second month in a row. This restrained overall output growth to 0.2 percent last month.

“Despite some concerns in the retail sales report, at least we can be sure that consumers are not giving up their important support for the economy, even if they are experiencing a marked decline in confidence, if not completely depressed by what lies ahead.” said Christopher Rupke, chief economist at FWDBONDS in New York.

Shares on Wall Street fell as investors worried that strong retail sales could give the U.S. central bank ammunition to aggressively tighten monetary policy. The financial markets are more likely to raise interest rates by 50 basis points next month. This year, economists expect up to seven rate increases.

The dollar fell to a basket of currencies, and US Treasury prices rose.

Broad income

Retail sales last month were also raised by rising prices due to the deficit amid tight supply chains. They are mostly made up of commodities and not adjusted for inflation.

Economists estimated that retail sales rose about 2.8 percent in January, adjusted for inflation, which brought them back in line with the pandemic trend.

Revenues at car dealerships fell 5.7 percent after falling 1.6 percent in December. Sales in electronics and home appliance stores rose 1.9 percent. Sales in building materials stores grew by 4.1 percent. Also increased sales to grocery and beverage stores, as well as clothing retailers.

But sales at sporting goods, hobbies, musical instruments and bookstores fell 3.0 percent, suggesting consumers are cutting free spending, likely due to inflation. Sales at gas stations fell 1.3 percent amid falling gasoline prices.

Revenues in restaurants and bars fell 0.9 percent as Covid-19 infections caused by the Omicron variant reduced mobility. Restaurants and bars are the only category of services in the retail sales report. Sales in online stores grew by 14.5 percent.

Excluding cars, petrol, building materials and foodstuffs, the retail trade turnover grew by 4.8% in January. Data for December were revised below to show that these so-called major retail sales fell 4.0 percent instead of 3.1 percent as previously reported.

The main retail sales volume is most consistent with the component of consumer spending gross domestic product.

Economists estimate that inflation-adjusted major retail sales rose 2.7 percent last month. So-called real major retail sales are important in measuring consumer spending growth.

Solid real major retail sales in January suggest that consumer spending this quarter is unlikely to be as weak as economists expected. Real consumer spending fell 1.0 percent in December, leading to slower consumption growth.

“Recent data volatility makes it difficult to identify the underlying trend, but the recent consumer spending momentum now looks stronger than we expected,” said Daniel Silver, JPMorgan economist in New York City.

Estimates of consumer spending growth are still below 2.0 percent year on year. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 3.3 percent in the fourth quarter.

Estimates of economic growth for the first quarter are mostly below 2 percent year on year. In the fourth quarter, the economy grew by 6.9 percent. Growth in 2021 was the strongest since 1984.

Lucia Mutsikani; Editors: Chizu Nomiyama and Paul Simao

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