Retail sales surged 5.3 percent for January, far better than expected
U.S. retail sales surged 5.3 percent in January, far higher than analysts and economists expected, providing a needed jolt to an economy that showed signs of weakening at the end of last year.
The large jump in sales, reflected in data released Wednesday by the Commerce Department, was most likely fueled by the latest round of stimulus checks that were mailed out at the end of last year. The $600 checks, in addition to some easing in virus outbreaks and the increased distribution of vaccines, helped bring customers back into stores and restaurants last month.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, called the January increase “remarkable” and predicted that spending would continue to grow in the coming months as the country began making progress against the coronavirus and consumer sentiment continued to improve.
“The overall strength in the numbers cannot be overstated, as every retail category was up over December,” Mickey Chadha, a retail analyst at Moody’s Investors Service, said in an email.
Businesses from auto dealers to department stores, which have struggled mightily to attract customers during the pandemic, showed strong sales growth. The positive figures came after three consecutive months of retail sale declines, which worried policymakers that efforts to soften the financial effects of the pandemic were falling short.
The deep drop around the holidays — with sales falling 1 percent 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 percent in January. But the stimulus money appeared to translate quickly into more spending, rather than savings.
“At least half of the stimulus money sent to individuals has been spent already,” Robert Frick, a corporate economist at Navy Federal Credit Union, estimated. “The extension of unemployment benefits likely gave those without work the confidence to spend versus save.”
Driving the larger-than-expected increase were strong sales of electronics, which increased 14.7 percent from December, and furniture and home furnishings, which rose 12 percent.
Even restaurants, among the hardest hit by the pandemic, saw strong sales in January, increasing about 7 percent — though they remained nearly 17 percent below their levels from a year ago.
Department stores were another standout, with sales increasing 23.5 percent.
The retailers’ trade group, the National Retail Federation, called the stimulus money a “lifeline” but also urged the Biden administration to continue distributing vaccines as quickly as possible.
Even with a few challenges ahead, many economists said Wednesday that the rebound in consumer spending should be sustainable, helping buoy the overall economy as jobs grow again.
Shepherdson, of Pantheon Macroeconomics, said that the recent winter storms crippling the Southwest could dampen sales this month.
But, he added, they could rebound again this spring if more financial assistance flows from the Biden administration’s stimulus plan currently being hashed out with Congress.
“Bigger increases should then follow in the second quarter as the approach of herd immunity allows more restrictions to be dropped and people’s fear of becoming seriously ill from COVID diminishes,” Shepherdson wrote in a research note.
“Households, in aggregate, have more than enough cash — with more to come from the stimulus bill we expect will pass in March — to finance both a huge rebound in spending on services and continued increases in spending on goods,” he wrote.