Retail sales jumped up 3.8% month-on-month (m/m), well above the consensus estimate for an increase of 2.0%. December’s reading had a marginal downward revision to -2.0% m/m from -1.9% m/m reported earlier.
Autos & parts dealers had a strong month, rising 5.7% m/m despite December’s downward revision to -1.6% vs. (-0.4% reported earlier).
Excluding autos, retail sales were up 3.3% m/m. Sales at gasoline stations declined by 1.3%m/m, while building materials retailers saw a gain of 4.1% m/m in January.
Sales in the “control group”, which exclude the most volatile categories and are used in calculating personal consumption expenditures (and GDP), were up by 4.8% m/m. However, December sales were revised weaker, -4.0% m/m from the advance reading of -3.1% m/m.
- Within the group, the biggest contributors to growth were non-store retailers (+14.5% m/m), department stores (+3.6% m/m) and furniture & electronics/appliance stores (+5.2% m/m),
- Several categories were in the red, including food services & drinking places (-0.9% m/m), sporting goods, hobby, book & music stores (-3.0% m/m), health & personal care (-0.7% m/m) and miscellaneous stores retailers (-0.1% m/m).
Key Implications
What a strong start to the year! One third of the strength came from auto sales, with consumers snapping up cars as they roll off the assembly line despite increasingly higher vehicle prices. Non-store retailers returned with vengeance, recovering all of their December losses and more. Other categories also delivered a strong performance as consumer demand is proving resilient to Omicron and post-holiday spending fatigue typical of the winter months. One disappointment is the decline in sales in food establishments and bars, which may point to a momentum loss in services growth, a more detailed reading of which will come out at the end of the month.
Looking to the year ahead, retail trade growth should remain steady. Consumers haven’t made a sizeable dent in their pandemic nest egg, which should support a healthy level of spending, especially as job and income growth remains healthy. One risk is that consumers become more and more pessimistic about their spending prospects as concerns over inflation continue to mount. Still, we expect that goods inflation will ease as consumer demand shifts towards services consumption, which should help balance out spending without tempering growth.
