Retail Sales Saw a Sharp Rebound in January Amid Cooling Inflation

February 15, 2023

Consumer spending saw a big upswing last month, reversing a worrying trend seen at the end of last year and adding to evidence that the U.S. economy has picked up steam in the early part of the year.

On a seasonally adjusted basis, U.S. retail sales–which includes consumer spending in stores, online, and dining out at bars and restaurants–jumped 3% in January, the biggest monthly gain in nearly two years. That is well ahead of the 1.9% gain Dow Jones had forecasted and a marked turnaround from recent months. December’s 1.1% decline followed on a disappointing November, raising concerns about consumers’ ability to weather rampant inflation.

The surge in retail spending comes as goods prices are cooling significantly from an earlier surge in inflation driven by pandemic-era spending patterns and supply-chain bottlenecks during the initial economic re-opening. Prices for core goods, excluding volatile categories like food and energy, saw an increase of just 1.4% last month, compared with a 7.2% increase for services.

While inflation has cooled in recent months, it remains high, and the impact inflation has on retail sales data can be difficult to determine, as unlike most economic data released by the government, retail sales figures are not adjusted for inflation. This means that consumers may be spending more, but actually consuming less as higher prices force them to reconsider spending.

On a year-over-year basis, retail sales increased 6.4% in January, which was exactly in line with the month’s consumer price index (CPI) report.

Read all Blog posts