Retail sales inch higher in January, inflation measure rises

Consumer spending remained steady in January with retail sales up 2.34% from a year ago, according to data from the National Retail Federation (NRF), CNBC, and Affinity Solutions. Sales that exclude restaurants, automobiles and gasoline were up 3.24% year over year.

“January sales continued the strong performance of retail sales in December, which is impressive coming off a record holiday season,” said NRF President and CEO Matthew Shay. “More importantly, year-over-year growth was solid, showing consumers are still optimistic and willing to act on the spending power brought by growing employment and wages. This is a great start to the new year.”

NRF reports retail sales were up in five categories last month. Leading the pack were online sales which jumped 25.47% from a year ago. Health and personal care sales rose 9.7% year over year and clothing sales increased 5.9% from January last year. Grocery sales edged up 4.06% from a year ago. Sporting goods sales were also up 1.79% from a year ago with general merchandise sales inching up 1.14% from January 2023.

Building and garden supply sales were down 1.55% from a year ago. Electronics sales fell 4.21% from January 2023. Furniture and home furnishing sales slid 6.35% from a year ago, according to the NRF report.

A separate report from the U.S. Bureau of Labor Statistics on Tuesday (Feb. 13) cited higher-than-expected inflation with all items measured up 3.1% for the past 12 months. The hotter inflation reading was a surprise to economists and it bucked the lower trend seen over the past several months.

Higher prices also helped to fuel the increase in retail sales values in some categories like food and apparel. Grocery food prices rose 1.2% in January compared to a year ago. Restaurant prices jumped 5.1% in the year-over-year period, according to the BLS report.

Apparel prices were up 0.1% from a year ago, with jewelry prices down 1.6% from a year ago. Overall, apparel prices were mixed with men’s suits, outerwear and basics prices up 2.5% from a year ago, while women’s dress and outerwear prices fell 3.8% from a year ago. The higher overall apparel and accessories prices helped to push sales higher.

Inflationary prices also hindered sales in other retail categories like furniture, appliances and electronics. Furniture prices were up 1.3% year over year while appliance costs rose 1.2%. Computer electronics costs are up 2% from a year ago. BLS said shelter prices rose 6% over the past 12 months.

Economists with Wells Fargo Securities have said higher overall costs for shelter and many services will likely continue to hinder overall retail sales growth noting that some of the retail spending in January was likely due to gift card spending.

While inflation is generally moving in the right direction, Wells Fargo economists said the prices of many things are not falling. Consumers are feeling pinched from higher prices for items they frequently purchase, according to Sarah House, senior U.S. economist at Wells Fargo.

“Consumer spending has remained remarkably resilient over the past year but as 2024 gets under way we expect to see more of a moderation in spending emanating from a slowing jobs market. The unique factors of excess liquidity and easy access to cheap credit are tales of the past in the story of consumption,” House noted.