U.S. consumers accelerated their retail spending in January as COVID-19 cases eased nationwide, even as they confronted the hottest inflation in four decades.
Retail sales, a measure of how much consumers spent on a basket of goods ranging from cars to food and gasoline, rose 3.8% from the prior month, the Commerce Department said Wednesday. Economists surveyed by Refinitv expected sales to rise 2%. It marked a sharp rebound from December, when sales unexpectedly dropped 2.5%.
The so-called core retail sales, which excludes automobiles, gasoline, building materials and food services and is most closely correlated with the consumer spending aspect of the nation's gross domestic product, climbed 3.3% last month after tumbling 2.8% in December.
"There were few signs that higher prices have caused consumers to pull back on spending," said Nationwide chief economist David Berson. "After December’s lull – caused mostly by consumers buying ahead – it appears that the tight labor market and record-high household net worth continue to power retail sales."
Still, Berson noted that gasoline sales fell 1.3% last month, possibly a result of the rising cost. A gallon of gas, on average, cost $3.51 nationwide on Wednesday, according to AAA – up from $2.51 a year ago. In California, gas prices are well over $4 per gallon. Prices are expected to climb higher as the country enters peak travel season and as heightened tensions between Russia and Ukraine threaten to further rattle the market.
Online shopping saw the biggest increase last month, with nonstore retailers posting a gain of 14.5%. Gains in sales were broad-based: Department stores saw business jump 9.2% last month, while general merchandise stores rose 3.6%. Furniture and home furnishings stores saw sales climb 7.2%.
Still, restaurants saw a 0.9% decline from the previous month, likely as consumers continued to stay home to avoid the virus.
The data comes as consumers face the worst inflation spike since 1982: The government reported last week that the consumer price index climbed 0.6% in January, bringing the year-over-year gain to 7.5%, the highest since June 1982. Wholesale prices also increased, rising 1% in January and 9.7% in a 12-month period.