|
|
After sliding 2.8 percent in December, consumer retail spending bounced up 3.8 percent in January to a record $649.8 billion, despite a 40-year record inflation rate, as the Omicron virus began to ebb, the U.S. census bureau reported.
It was the sharpest monthly jump since March 2021, when households began receiving federal stimulus checks.
The spending bump came even as prices increased 7.5 percent, year on year, the fastest clip in 40 years.
However, as we have continually noted, the reports do not adjust the monthly spending figure for inflation; January’s higher figure could mean that things simply cost more than in December, not that consumers are buying larger quantities of stuff, the commerce department pointed out.
Therefore, consumers may well be buying less products but paying more for them. In 2021, about a third of the increase in consumer spending was simply higher prices charged by inflation, Craig Johnson, president of Customer Growth Partners, said to The Wall Street Journal.
Inflation will account for as much as 60 percent of this year’s increase in consumer spending, he estimated.
Consumers spent 14.5 percent more online last month, with department stores selling 9.2 percent more, furniture sales gaining 7.2 percent and vehicle purchases from dealers adding 5.9 percent. Building materials also sold briskly.
Restaurants and bars saw fewer customers as the Omicron variant still prompted caution among diners.
Sales slipped 3 percent among bookstores, hobby shops, musical instrument stores, and for sporting goods. Gas stations took in 1.3 percent less as gasoline prices dipped during the month.
The retail sales report does not include spending on services other than at dining establishments, but the service sector is estimated to have drooped last month because of lingering Omicron fears, the WSJ noted.
As new virus cases decline, spending on services is likely to increase, shifting spending from goods and helping to ease inflation in that sector, economists told the WSJ.
That shift may have begun: spending on airfare, entertainment, and lodging all edged up late in the month, according to Bank of America’s credit- and debit-card use data.
January’s bump in spending aligns with other signs that the economy is healing, including rising wages, an abundance of available jobs, and a 4-percent unemployment rate.
Strong consumer spending is a driver of inflation and a factor in the U.S. Federal Reserve’s increasing likelihood of raising interest rates at its meeting next month, the WSJ said.
TREND FORECAST: While inflation is driven partly by shortages of raw materials, workers, and tangled supply chains, higher prices also are caused by consumers’ unrestrained urge to spend.
Locked up and restricted from many freedoms in the two-year fight to win the COVID War, consumers are spending their way to joy… shopping before they drop.
However, as interest rates rise and the economy contracts, retail spending will decline.