Retail Sales Jumped 5.3% in January, Far Higher Than Expected

on Feb17
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Retail sales surged 5.3 percent in January, far higher than analysts and economists expected, providing a needed jolt to an economy that showed signs of weakening at the end of last year.

The large jump in sales, reflected in data released Wednesday by the Commerce Department, was most likely fueled by the latest round of stimulus checks, which were mailed out at the end of last year. The $600 checks, some easing in virus outbreaks and the increased distribution of vaccines helped send customers back into stores and restaurants last month.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, called the January increase “remarkable” and predicted that spending would keep growing in the coming months as the country began making progress against the coronavirus and consumer sentiment continued to improve.

Driving the larger-than-expected increase were strong sales of electronics, which increased 14.7 percent from December, and furniture and home furnishings, which rose 12 percent.

Even restaurants, among the hardest hit by the pandemic, saw strong sales in January, increasing about 7 percent — though they remained nearly 17 percent below their levels from a year earlier.

Department stores were another standout, with sales increasing 23.5 percent.

The retailers’ trade group, the National Retail Federation, called the stimulus money a “lifeline,” but also urged the Biden administration to continue distributing vaccines as quickly as possible.

Even with a few challenges ahead, many economists said on Wednesday that the rebound in consumer spending should be sustainable, helping buoy the overall economy as jobs grow again.

Mr. Shepherdson, of Pantheon Macroeconomics, said that the winter storms crippling the Southwest could dampen sales this month, but that they could rebound again this spring if more financial assistance flowed from the Biden administration’s stimulus plan currently being hashed out with Congress.

“Bigger increases should then follow in the second quarter as the approach of herd immunity allows more restrictions to be dropped and people’s fear of becoming seriously ill from Covid diminishes,” Mr. Shepherdson wrote in a research note.

“Households, in aggregate, have more than enough cash — with more to come from the stimulus bill we expect will pass in March — to finance both a huge rebound in spending on services and continued increases in spending on goods,” he wrote.

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