US Retail Sales Make Strong Recovery

Words by Retail Bum

US Retail Sales Make Strong Recovery
US Retail Sales Make Strong Recovery

U.S. retail sales made a sharp recovery in January after two months of straight decline — a sign of the country’s economic resilience in the face of high-interest rates.

Retail sales in January 2023 surged 3% after registering a 1.1% decline in December, The Commerce Department announced Wednesday.

An increase in motor vehicle sales and demand for other goods drove the January rebound. In addition, higher gasoline prices inflated receipts at service stations. That being said, even after accounting for anomalies, U.S. consumers are spending more money.

“The bottom line is that the underlying trend in consumption is not as weak as the December numbers indicated, but is also not as strong as the January numbers might suggest,” said Lou Crandall, chief economist at Wrightson ICAP, told Reuters.

The news comes just a week after Bank of America reported a surge in credit and debit card spending in January. The bank noted “that while lower-income consumers are pressured, they still have solid cash buffers and borrowing capacity,” adding that “even for the lowest-income cohorts, this should provide support for some time yet.”

Part of the increase is also driven by strong wage growth, even as hiring has slowed down. In response, the Fed has raised its policy rate by 450 basis points since March 2022 from near zero to 4.5% to 4.75%. In addition, the Fed plans to increase rates again by 25 basis points in March this year and then later again in May 2023.

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