The widest barometer of U.S. economic activity rebounded sharply in January as consumers scooped up deals on clothes, TVs and refrigerators.
This, as the Census Bureau’s January reading of retail sales started the New Year with a 3% snapback on the heels of 1% and 1.1% declines in November and December, respectively.
On an annualized basis, the report said that sales at retailers and restaurants — which are not adjusted for inflation — were up 6.4% from January 2022, a gain that exactly matches the CPI data released the day before and suggests that all of the gains are the result of price increases rather than increased activity.
If food, fuel and auto sales are backed out, the core retail result was up 2.3% from December and 3.9% from a year ago.
Looking inside the latest numbers, the 17.5% monthly increase in sales at department stores was far and away the biggest gainer for the month, while on an annualized basis, trailed the latest headline inflation number by a full percentage point.
Other standout performers in January included a 7.2% sequential increase in food services and drinking places, a 6.4% rise in auto dealers, as well as a 4.4% gain by furniture stores and a 3.5% month-on-month bump in sales of electronics.
“[A] 7.2% gain in restaurant retail sales in January was strongest since March 2021, before [the] pandemic,” Liz Ann Sonders, chief investment strategist at Charles Schwab, tweeted to her 351,000 followers after the numbers crossed. “[W]e’ve never seen that kind of strength.”
7.2% gain in restaurant retail sales in January was strongest since March 2021 … before pandemic, we’ve never seen that kind of strength pic.twitter.com/qbGPVAfP6q
— Liz Ann Sonders (@LizAnnSonders) February 15, 2023
On the downside, gas stations recorded no increase in sales from December, and only a 5.7% increase from January 2022, while grocery stores rose just 0.1% for the month and 6.6% from a year ago.
While the January increase in retail sales activity snapped a two-month slump and came in well ahead of Wall Street expectations, the volatility of the monthly numbers, as well as the ongoing cocktail of consumer concerns surrounding inflation, widespread job cuts and an ongoing rate hike cycle by the Federal Reserve leave investors with a much more muddled response.
“Wow….Retail Sales MUCH stronger….the consumer doesn’t want to back down…so the FED will force them to….Expect higher rates for longer…. Just sayin’,” Kenny Polcari, market analyst and managing partner at Kace Capital Advisors, tweeted to his 20,000 followers.
Wow….Retail Sales MUCH stronger….the consumer doesn’t want to back down…so the FED will force them too….Expect higher rates for longer…. Just sayin’
— Kenny Polcari (@KennyPolcari) February 15, 2023
To that point, the Fed is slated to weigh in a week from now when it releases the minutes from its latest meeting, which will guide investors, consumers and businesses on what it is thinking after increasing rates for eight consecutive months beginning last March, from 0% to the present 4.5% to 4.75% target, which is a 15-year high.
Prior to that, Tuesday morning (Feb. 21) Walmart will release its fiscal fourth-quarter earnings results for the three months ending Jan. 31. Ahead of those numbers, the operator of nearly 5,000 physical stores in the U.S. and over 10,500 worldwide finds itself in an increased battle with competitors over groceries — its single-largest source of revenue and driver of in-store traffic.
This, as Amazon continues to drop hints that it is moving closer to a full-scale, mass-market expansion of its Fresh line of supermarkets to augment its more niche and high-end chain of 500 Whole Foods stores.
“We’re hopeful that in 2023, we have a format that we want to go big on, on the physical side,” Amazon CEO Andy Jassy told the Financial Times Monday (Feb. 13). “We have a history of doing a lot of experimentation and doing it quickly. And then, when we find something that we like, doubling down on it, which is what we intend to do.”
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