U.S. retail sales grew 3% M/M and 6.4% Y/Y in January, the fastest clip in nearly two years and a reversal from a two-month slump. The robust growth comes after another report that showed that U.S. inflation cooled slightly in January to 6.4% down from 6.5% in December, raising the specter that the Federal Reserve could continue increasing interest rates through summer.
That clip came at the high end of estimates provided by economists polled by Reuters, with the consensus forecast that sales would only increase 1.8%, with estimates ranging from 0.5% at the low end to 3.0% at the top of the range.
"Although resilient consumer spending is a positive sign for the health of the economy, renewed demand for supply-constrained categories could add to inflation pressures, potentially eliciting more aggressive action from the Fed," Kayla Bruun, economic analyst at decision intelligence company Morning Consult, told Reuters.
The auto categories posted strong growth during the month with a 5.9% month-over-month jump and 2.8% year-over-year gain; Furniture and home furnishings spending also came in surprisingly strong with a 4.4% month-over-month increase and 3.8% year-over-year rise. Restaurant spending was, however, the key highlight after posting an impressive 7.2% month-over-month and 25.2% year-over-year expansion while Grocery spending was only up 0.1% from the prior month, but 6.6% higher than last year with elevated pricing a boost.
Among the laggards was e-commerce spending with the nonstore retailers category only recording a 3.0% year-over-year increase, well below the overall 6.4% retail sales year-over-year increase.
Meanwhile, the tight labor market has continued generating strong wage growth, though the pace has lately cooled off. The Federal Reserve has raised its policy rate by a total of 450 basis points since last March from near zero to the current 4.50%-4.75% range. The market expects the Fed to announce two additional rate hikes of 25 basis points in March and May.
By Alex Kimani for Oilprice.com
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