The numbers: Sales at U.S. retailers surged in January and posted the first increase in four months, adding to evidence of a rebound in the economy after fresh government financial aid and a waning number of coronavirus cases.
Retail sales leaped 5.3% last month, the government said Wednesday. It was the largest increase in eight months.
Economists polled by Dow Jones and The Wall Street Journal had forecast a smaller 1% increase.
What happened: Sales were strong in every category. Department store chains, Internet retailers, electronic stores and home-furnishing outlets all recorded double digit gains in percentage terms.
Bars and restaurants also registered a nearly 7% increase in sales after receipts had fallen three months in a row. Cold weather and new business restrictions, imposed after a record increase in coronavirus cases, slammed restaurants toward the end of 2020, but states started to lift restrictions early in the new year as the pandemic began to wane again.
Retail sales rose 6.1% in January if auto dealers and gasoline stations are excluded. Auto and gas purchases often swing up and down and can mask underlying trends in retail sales.
In January, auto sales increased 3.1%. Auto purchases account for about one-fifth of overall retail sales. Gas receipts advanced 4%, largely reflecting higher prices.
The sales decline in December was revised to 1% from an initial 0.7%.
Big picture: The increase in spending last month was fueled in part by $600 federal stimulus checks for millions of Americans and more generous unemployment benefits. What also helped were loosened state restrictions on business brought on by a sharp decline in coronavirus cases.
Consumers are likely keep spending in the months ahead.
The Biden administration is poised to send out additional $1,400 stimulus checks to lower income workers as part of a nearly $2 trillion coronavirus-aid package. Coronavirus cases are declining and about 16% of Americans have now been vaccinated against the coronavirus, paving the way for a stronger economic recovery later in the year.
Consumer spending accounts for 70% of U.S. economic activity and retail sales is one-third of that.
What they are saying? “With additional fiscal stimulus on the way, new Covid cases trending lower, and many states moving to relax social distancing measures, the worst looks to be in the rear view mirror, with spending on services in particular poised to benefit in the months ahead,” said economist Katherine Judge of CIBC Economics.