(WASHINGTON) — Americans rebounded from a weak holiday season and stepped up spending on retail goods in January, an encouraging sign for the strengthening economy.
Retail sales rose at a seasonally adjusted 0.4 percent last month, the Commerce Department said Tuesday. Consumers spent more on electronics, home and garden supplies, sporting goods, at department and general merchandise stores and at restaurants and bars.
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Consumers spent less on cars in January, the report showed, even though automakers have previously reported higher sales in January. That suggests dealers offered discounts in order to boost sales. Low interest rates, better loan availability and new car models have helped drive sales higher in the last three months.
The January retail sales figures were an improvement from December, which were downwardly revised to show a flat reading. And excluding autos, building materials and gasoline station sales, core retail spending jumped 0.7 percent.
The “retail sales data are better than they look, but they don’t suggest that consumption growth is about to set the economic recovery alight,” Paul Dales, an economist at Capital Economics, wrote in a note to clients.
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The government’s retail sales report is its first look each month at consumer spending, which represents 70 percent of economic activity. The positive data suggest that hiring gains have encouraged more people to spend, which should lead to stronger growth.
Economists had expressed concerns that consumers might pull back on spending this year because their wages hadn’t kept pace with inflation. And many consumers relied on savings to make up the difference.
The report suggests consumers are managing to increase spending at the same pace they did late last year, despite only small gains in pay.
“The good news is that the strong January gain establishes that the consumer trend is not folding,” said Pierre Ellis, an economist at Decision Economics.
Retail sales have risen about 21 percent since hitting a recession low. And they’re nearly 6 percent above their pre-recession high.
Sales at gasoline stations rose 1.4 percent last month, the most in 10 months. Gas prices have risen steadily in recent months. The average price for a gallon of gas was $3.51 on Monday, up 12 cents from a month earlier.
Earlier this month, big chain retailers reported a solid increase in January sales. The gains weren’t evenly spread. Lower-priced stores such as Target and Costco reported big gains. Macy’s and other stores that sell mid-priced goods didn’t do as well.
The government’s monthly report is a broader gauge of retail sales. It covers purchases at all retailers, including auto dealerships, restaurants and bars, grocery stores and gasoline stations.
Consumers are taking on more debt after cutting back in the aftermath of the recession. Consumer borrowing, which includes credit cards, auto loans, and student loans, posted the biggest monthly gains in a decade in November and December.
The increases suggest consumers are more confident about the economy. But they could also mean that some are increasingly reliant on credit as wages have failed to keep up with inflation in the past year.
Hiring has picked up in recent months, which could support more spending. Employers added 243,000 net jobs last month, the fifth straight month of solid hiring.
The economy, meanwhile, expanded at an annual rate of 2.8 percent in the final three months of last year. Growth may slow a bit from that pace in the current quarter. Many economists forecast modest growth of 2 percent to 2.5 percent this year.
