The U.S. Commerce Department released a report on Wednesday (16th) that consumer spending rebounded sharply in January, hitting a 10-month high, as inflation rose and post-holiday consumption continued unabated.
Retail sales rose 3.8% in January, well ahead of the Dow Jones’ forecast of 2.1%.
This figure is not adjusted for inflation. The December figure was revised down to a 2.5% decline following the consumer price index (CPI) rose 7.5% in January, compared with a 1.9% decline initially.
Excluding auto sales, retail sales rose 3.3 percent following falling 2.8 percent in the previous month.
In percentage terms, online shopping contributed the most, with non-brick-and-mortar retailers growing 14.5%. Sales of furniture and household goods rose 7.2 percent, while auto and parts dealers rose 5.7 percent.
Sales at sporting goods, music and bookstores fell 3%, while gas station revenue fell 1.3% as lower fuel costs led to lower gas station prices.
Overall retail sales rose 13% from a year earlier, driven by a 33.4% surge in gas station sales and a 21.9% surge in clothing store sales.
The overall uptick in sales represents the strength of American demand for goods. A surge in the number of cases associated with the Omicron variant dampened spending in the services sector this month. Even as inflation hits multi-decade highs and consumer confidence falters, a strengthening labor market has pushed consumers to continue spending on goods such as cars and furniture.
The numbers come as the economy faces its worst inflation in 40 years, which helps reflect the retail sales figures. The Federal Reserve is expected to raise interest rates several times this year in response to rising prices, with the Fed expected to raise short-term borrowing rates by 0.5 percentage points in March.
U.S. stocks reacted little to the retail news and are expected to open flat.