January Retail Sales Rise Despite Inflation Woes

New York—U.S. monthly retail sales in January surpassed analyst expectations, holding strong in the face of rising inflation, bad weather, the Omicron variant, and international tensions.
 
Sales were up 3.8 percent month-over-month in January to $649.8 billion, according to data from the U.S. Department of Commerce released Wednesday, while year-over-year sales were up 13 percent.

The results exceeded analyst expectations of a month-over-month increase of 2.1 percent.
 
December sales were weaker than previously thought, down 2.5 percent month-over-month rather than the previously reported 1.9 percent, as per the revised figures.

The numbers provided are not adjusted for inflation, but consumers have been battling rising prices.

The consumer price index, which measures the average change in prices over time consumers will pay for a basket of goods and services, rose 0.6 percent month-over-month in January and 7.5 percent year-over-year, the largest 12-month increase since February 1982.

“Consumers say they are worried about inflation, but they continue to spend,” wrote PNC Chief Economist Gus Faucher in an analyst note quoted by CNBC.

“Even taking into account the December decline, retail sales in recent months have been increasing much faster than prices, so households are purchasing larger volumes of goods and services, not just paying higher prices.”

The National Retail Federations calculation of retail sales—which excludes automobile dealers, gasoline stations and restaurants to focus on core retail—showed January was up 4.7 percent seasonally adjusted from December and up 8.5 percent unadjusted year-over-year.

“January’s numbers show that 2022 is starting very strong for consumers and retailers, especially on the heels of a record holiday season and record sales in 2021,” said NRF President and CEO Matthew Shay in a press release about the results.

The NRF’s holiday season runs from Nov.1 to Dec. 31, and sales for that period reached a record high. However, month-over-month sales in December were down, due in part to an early start to holiday shopping. 

For the month of January, Shay noted retailers currently face many challenges including inflation, labor shortages, COVID-19, and uncertainty related to international tensions in Russia and China.

NRF Chief Economist Jack Kleinhenz also highlighted the myriad issues faced by retailers, making January’s sales “all the more impressive.”

“A triad of forces weighed on consumer behavior and spending as weather slammed a large portion of the United States, the omicron variant was relentless, and inflation was escalating. On top of that, the enhanced child care tax credit ceased at the end of 2021, impacting millions of families. Despite all that, consumers ramped up spending even after a record-breaking holiday season.”

The strong numbers in the face of these issues show that consumers are spending, said Shay, and that the economy is in “good shape,” making Shay hopeful yet cautious for the year ahead.

“We are confident that retail sales growth and overall consumer financial health can continue, and current pressures in the economy should be moderated if election-year political pressures don’t result in policy decisions that compound the challenges our economy is already facing.”

Breaking it down by category, January sales were up on a monthly and yearly basis in all but two sectors. Sporting goods stores and electronic and appliance stores both saw slight year-over-year declines.

Year-over-year gains were led by clothing stores, building materials stores and online sales.