January retail up 5.3% in month
7-month sales high hints at help from stimulus checks of $600
U.S. retail sales surged in January by the most in seven months, beating all estimates and suggesting fresh stimulus checks helped spur a rebound in household demand after a weak fourth quarter.
The value of overall sales increased 5.3% from the previous month after a 1% decline in December, Commerce Department figures showed Wednesday. It was the first monthly gain since September and all major categories showed sharp advances.
The $600 stimulus checks, sent out at the very end of last year, pushed people to buy new furniture, clothing and appliances.
Darryl Crum bought a new washing machine with his stimulus money, since his old one wasn’t spinning clothes well enough anymore. He chose a model that was made in America and bought it from a family-owned store instead of the major chain he usually gets appliances from.
“As I see it, the goal was to stimulate the economy,” said Crum, who is retired and lives in DeKalb, Ill. “And I contributed.”
The deep drop around the holidays — with sales falling 1% in the typically strong month of December — prompted some economists to predict that the economy was headed for a “double dip” recession unless the federal government provided more financial assistance to struggling consumers.
After the latest round of stimulus was passed by Congress and signed by then
President Donald Trump at the end of 2020, economists expected that retail sales would increase by 1.2% in January. But the stimulus money appeared to translate quickly into more spending, rather than savings.
Non-store retailers, which includes online stores, rose 11%, the most in two years. Food services and drinking places rose 6.9% as restrictions eased at restaurants and bars across the country. Furniture stores, and electronics and appliance merchants also saw double-digit gains in the month.
Sales jumped 23.5% at department stores after slumping 3% over the last year.
The “control group” subset of sales, which excludes food services, car dealers, buildingmaterials stores and gasoline stations, rose 6%, the largest gain since June.
Gas station receipts rose 4%, which at least in part reflected higher fuel prices. The retail figures aren’t adjusted for price changes, so sales could reflect changes in gasoline costs, sales — or both. At the end of January, the average nationwide price for a gallon of gasoline was $2.42 — roughly in line with pre-pandemic prices.
A surge in covid-19 cases curbed spending at year-end, but since then, virus cases have ebbed and states have started to ease some restrictions on businesses and activity. The ability to shop and eat out, paired with the latest round of stimulus payments, helped drive spending in the month across a variety of categories.
“American shoppers blew the doors off retailers in January,” said Sal Guatieri, an economist at BMO Capital Markets, in a note to investors. “Many households treated themselves after a less-than-merry holiday season.”
The jump in retail sales could further embolden Republican opposition to President Joe Biden’s $1.9 trillion stimulus plan, which many in the GOP say is too big. Even so, Democrats are on track to narrowly pass the package without Republican votes, and the data could also be held up as evidence of how critical relief payments are to the economy and jobs.
The report shows that when fiscal aid “arrives to household balance sheets, it does get turned around fairly quickly and materializes in economic activity,” Michael Gapen, chief U.S. economist at Barclays Plc, said on Bloomberg TV.
With another stimulus package likely in March, “we should see a pretty rapid acceleration in demand and household spending as we move into the into the second quarter, which could be continued if vaccinations continue apace, and mobility gradually recovers over time,” Gapen said.
Seasonal adjustment factors also played a role in the stronger-than-expected figures.
Wednesday’s report covers about a third of overall consumer spending. It doesn’t include haircuts, hotel stays and other services, which have been badly hurt by the pandemic.
Other data from the Labor Department showed producer prices increased 1.3% in January, the biggest gain in records dating back to 2009, driven by broad-based gains in categories including portfolio management, energy and food.
The core measure of wholesale prices, which excludes energy and food, jumped by 1.2% — also the most in records — over December. Meanwhile, a report last week showed the core consumer price index — a key measure of prices paid by U.S. consumers — was unchanged in January for a second straight month, pointing to the pandemic’s lingering restraint on inflation.