Gone shopping: Retail sales surged in January
Americans splurged in January as retail sales picked up sharply despite fewer car purchases, and a core reading was strong.
Retail sales overall increased 0.4%, above the 0.1% gain economists expected. Excluding volatile items -- autos, gasoline, building materials and food services -- sales rose 0.4%, matching economists' median estimate. Also encouraging is that December’s sales increase was revised up to 1% from 0.6%.
Americans are enjoying solid job and income growth and reduced debt. Yet while auto purchases bolstered retail sales in December, core readings that exclude volatile items have been sluggish recently. As a result, economists expected a healthy rebound in January.
Auto sales fell 1.4% but gasoline station sales increased 2.3% on rising prices.
Consumers also spent freely across almost all categories as sales rose 1% at clothing shops, 1.8% at sporting good stores, 1.6% at electronics outlets, 1.2% at department stores, 0.7% at health and personal care stores, and 1.4% at restaurants and bars.
Sales were flat at furniture stores and online.
The Federal Reserve is likely to scrutinize the report as it assesses the economy’s strength ahead of a possible interest rate increase in March. Consumer spending makes up about 70% of economic activity. The Fed lifted its benchmark short-term rate in December for the first time in a year.
"If solid retail sales are sustained in coming months, as we expect, then this will be additional ammunition for those on the (Fed's policymaking committee) who think that the Fed should move sooner with its next tightening move, rather than later," says Nationwide Chief Economist David Berson.