Retail sales receipts grew even bigger last month amid depressed levels of consumer sentiment.
Why it matters: The current divergence between spending and mood reflects the major opposing forces in this strengthening economy. It also potentially foreshadows a slowdown in demand.
State of play: Retail sales grew 3.8% in January from December, an initial reading from the Commerce Department said today. (Prices grew 0.6% in January.)
- Estimates pegged growth at about 2%.
Context: Last month's boom comes as inflation has been rising at its fastest pace in 40 years.
- Meanwhile, U.S. consumer sentiment has fallen to a more than 10-year low as households with $100,000 or more in income expect inflation to grow.
Between the lines: While prices have risen, demand was still the more powerful driver of January's sales increase.
- According to the Adobe Digital Economy Index, a tracker of online purchases, 78% of online January sales for example, was due to real demand, versus 22% from inflation.
The big picture: As much as the world has reopened, retail spending trends in January very much reflected the kind of demand that the economy has seen throughout the pandemic.
- Online shopping, home furniture and goods and the auto sector saw some of the strongest sales growth last month.
- The Omicron variant also likely kept people at home, and consequently dollars away from services businesses.
Be smart: This year’s record inflation comes as the result of one of the fastest economic recoveries in history.
- Consumers still have some $2 trillion-plus in excess savings.
Our thought bubble: Seems like retail therapy has become a national past time.
What to watch: When and how big any kind of slowdown may start.
- Shopify in its earnings report today warned its sales would slow this year.