Unexpected Spike in January US Retail Sales

By Prachi Makkar
Money and Investing Writer

The end of the year from November into the New Year in January is known for being the holiday season. Retailers are aware of this increase of shoppers and sales during the holiday season and always expect relatively higher sales. The amount of shoppers and the money they spend during this time increases dramatically. Analysts tend to have higher estimates around this time for retail sales. With the help of promotions, discounts, holidays, and many gifts, people spent more than expected.

This past January, retail sales rose 0.4 percent, higher than the expected 0.1 percent.
Recently, The Commerce Department reported that the retail sales for January rose 0.4 percent. Even the retail sales for December had to be revised. The original estimate was 0.6 percent which was later revised to a 1 percent rise. These numbers are despite the biggest drop of motor vehicle purchases in 10 months. In comparison to retail sales in January of last year, sales were up 5.6 percent. Retail sales, excluding automobiles, gasoline, building materials, and food services, have increase 0.4 percent.

According to economists polled by Reuters, forecast retail sales increased 0.1 percent and core sales increased 0.3 percent in January. Retail sales correspond closely with the consumer spending part of the gross domestic product.

These numbers, which ended up being higher than the forecasts, for the past month are showing a positive growth. Last year in the fourth quarter, the economy grew at a 1.9 percent annualized rate. January’s increased retail sales are supporting views of accelerated economic growth in the first quarter. An increase in consumer spending is beneficial for the country and more importantly, the economy.

The tightening labor market is helping the increase in consumer spending. It is also gradually boosting wage growth which also encourages the public to spend more. These reasons combined are helping with the country’s economic growth. A positive economic growth is leading the way for a minimum of at least two interest rate increases from the Federal Reserve this year.

The Fed has forecasted three rate increases for this year. Last December, the Federal Reserve increased its overnight interest rate by 25 basis points. This made the overnight interest rate go from 0.5 percent to 0.75 percent. The hope is to see consumer spending rise and a larger wage growth to help stimulate and grow the economy.

A version of this article appeared in the Tuesday, February 21st, 2017 print edition.

Contact Prachi at
prachi.makkar@student.shu.edu

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