(AP) — Fueled by pay gains, solid hiring and enhanced savings, Americans sharply ramped up their spending at retail stores last month in a sign that many consumers remain unfazed by rising inflation.
Retail sales jumped 3.8% from December to January, the Commerce Department said Wednesday, a much bigger increase than economists had expected. Though inflation helped boost that figure, most of January’s gain reflected more purchases, not higher prices.
Last month’s increase was the largest since last March, when most households received a final federal stimulus check of $1,400. The fact that consumer spending remains brisk even after government stimulus has faded — enhanced unemployment aid ended in September — suggests that Americans’ pay is rising enough to drive a healthy pace of spending and economic growth.
Still, those trends could also further accelerate high inflation, which has become the biggest threat to the economy and the reason the Federal Reserve is expected to raise interest rates several times this year beginning in March.
“Consumers say they are worried about inflation, but they continue to spend,” said Gus Faucher, chief economist at PNC Financial. “Job growth is strong, wages are increasing and household wealth is way up thanks to rapidly rising home values and, until recently, stock prices.”
Retail sales rose solidly across the spectrum in January. Sales at general merchandise stores rose 3.6% and at department stores 9.2%. Purchases at furniture and home furnishings stores increased 7.2%. Online sales jumped 14.5%.
Restaurants were an outlier in January: Sales fell 0.9%, likely a reflection of many people refraining from dining out at a time when reported omicron infections were exploding.
Gasoline sales fell 1.3%, possibly a result of the cost and cases of omicron, which rose in tandem, according to Ted Rossman, a senior industry analyst at Bankrate.com.
Since the pandemic erupted two years ago, spending has continued to be heavily weighted toward goods — things that people can own. But as COVID-19 cases decline, Americans are expected to begin spending more on concerts, movies and dinners out.
At the same time, Wednesday’s retail report covers only about one-third of overall consumer spending; it doesn’t include such services as haircuts, hotel stays and plane tickets.
The New York clothing company Untuckit has registered a rebound in recent weeks, with more people preparing for an eventual return to the office, said Aaron Sanandres, the CEO and a co-founder.
“I am optimistic that this time there is a bit more momentum,” Sanandres said.