- Retail sales jumped by 5.3% month-on-month in January, well above market expectations of 1.1%. This is the first month of positive growth since September and the strongest January growth in the past 20 years.
- Resilience was broad based, with all major categories participating. Sales were strongest at furniture and electronics stores (+13.1% m/m), non-store retailers (+11% m/m), sporting goods & music stores (+8.0% m/m) and food services & drinking places (+6.9% m/m). Most categories, with the exception of the last two have regained their losses since September.
- The “control group”, which is used estimate personal consumption expenditures, increased by 6.0% month-on-month. It is now 2.2% above its September reading.
Key Implications
- The latest income support measures and almost $2.4 trillion in accumulated savings provided a firm footing for American consumers to loosen their purse strings and make up for a muted holiday retail season.
- Retail sales are likely to continue to experience solid growth. According to the New York Fed Survey of Consumer Expectations, average spending growth expectations rebounded to 3% at the end of 2020. Equally important, this growth is expected among all income groups.
- In the meantime, Congress is working on another deal to provide more support to households. There is no official deadline, but it could be enacted before the expiration of the extended unemployment benefits in mid-March. Almost half the package is penciled in for direct support or extension of unemployment benefits, which should augment spending further.
