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Retail sales rise significantly in January, supporting Fed's March liftoff prediction
Total retail sales rose by 3.8 percent in January, following a decline of 2.5 percent in December and a 0.7 percent increase in November. NAFCU Chief Economist and Vice President of Research Curt Long analyzed the report in a new NAFCU Macro Data Flash report.
"Retail sales heated back up to a 10-month high in January on a seasonally-adjusted basis," stated Long. “It is important to note that retail sales are reported on a nominal basis, so some of the gains in recent months simply reflect rapidly rising prices rather than increases in quality or quantity."
Many sectors were winners in January, the biggest being nonstore retailers (+14.5 percent), furniture and home fixture stores (+7.2 percent), as well as motor vehicle and parts dealers (+5.7 percent). Losses hit several sectors during the month including sales at sporting goods and hobby stores which fell by 3 percent, followed by gasoline stations (-1.3 percent) and food services & drinking places (-0.9 percent).
"Consumer preference for nonstore retails and avoidance of restaurants can likely be explained by Omicron reaching what experts believe is its peak in January," added Long. "This report is yet another data point that supports the Fed's widely expected announcement of liftoff in March. Financial conditions have already tightened in anticipation of that decision, with no evident harm to the real economy."
Year-over-year growth in retail sales was up 12.7 percent during the month, which is down from 16.8 percent in December. Control group sales – which excludes auto, gas, and building material categories – were up 11.5 percent from a year ago.
“NAFCU expects the Fed will proceed with an aggressive rate hike campaign through June, which includes a 50-basis point hike in March, before slowing to a more gradual pace of rate increases in the latter half of the year,” concluded Long.
For more up-to-date economic updates from NAFCU's award-winning research team, view NAFCU's Macro Data Flash reports.