US consumers rebounded from a weak holiday shopping season last month by increasing their spending at stores and restaurants at the fastest pace in nearly two years, underscoring the economy’s resilience in the face of higher prices and multiple increases. of interest rates by the Federal Reserve.
The government said on Wednesday that retail sales rose 3% in January, after plunging the previous two months. It was the biggest one-month increase since March 2021, when a round of stimulus checks gave a big boost to spending. Excluding the pandemic era, the January rise was the biggest in more than two decades.
Driving the gain was a jump in auto sales, along with healthy spending at restaurants, electronics stores and furniture outlets. Some of the supply shortage that had held back car production has eased, and more cars are gradually moving onto dealer lots. Expanded inventories have allowed dealers to meet more of the country’s pent-up demand for vehicles.
Strong retail sales numbers for Wednesday, coupled with a strong jobs report for January, suggest that the economy remains durable, perhaps even strengthening, and at little risk of succumbing to a recession any time soon. Earlier this week, Goldman Sachs economists cut the probability of a recession this year from 35% to just 25%.
However, brisk consumer spending may also intensify upward pressure on inflation. The latest measure of consumer inflation showed it slowed slightly year-over-year in January, but rose sharply from December to January.
The combination of strong spending and hiring will likely also increase pressure on the Federal Reserve to raise its benchmark interest rate further. The Fed has already signaled that it expects to make two more quarter-point hikes, to a range of 5% to 5.25%, which would be the highest level in 15 years. On Tuesday, Deutsche Bank said it expected the Fed to add two additional hikes this year, to a range of 5.5% to 5.75%.
Part of the increase in retail sales last month likely reflected unusually warm weather, which may have encouraged more people to buy cars, shop and eat out. The government’s seasonal adjustment process probably also helped boost the January figure. Its seasonal adjustments are intended to modify sales data for typical calendar patterns. An example is a spike in spending during the holiday shopping season and then a drop in January.
[Con información de The Associated Press]
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