US retail sales rose 3% in January, blowing past economists' expectations and marking the largest monthly gain in nearly two years. The value of overall retail purchases increased 3%, the most since March 2021, after a 1.1% drop in the prior month, the US Census Bureau reported Wednesday. Retail sales, not including gasoline and autos, had the biggest increase in nearly two years at 2.6%.
The Commerce Department reported that retail sales were up 3.0% in January to top the consensus expectation of analysts as consumers showed strength in the face of inflation and macro pressures. Core sales, which strip out vehicle sales, rose 2.3%, versus estimates of 0.8%. The report’s control group, which strips out autos, gas, building materials, and food services, climbed 1.7% versus the expected 0.8% increase.
On Tuesday, the Labor Department reported a 6.4% year-over-year increase in the consumer price index for January. The headline CPI number was down from 6.5% in December, but came in above average economist estimates of 6.2%.
The Federal Reserve will view these statistics as reinforcing their continual battle against inflation. The most recent inflation survey revealed persistent price increases in the US, causing discomfort due to their elevated level. In contrast, the US Jobs Report for January was unexpectedly strong, with a total of 517k jobs created, far surpassing the anticipated 185k. The US economy is showing signs of continued growth, with the jobs market gaining strength, retail sales increasing, and manufacturing conditions improving. This will give the Federal Reserve the flexibility to keep interest rates higher for an extended period, if necessary.
The money markets are now predicting that the peak interest rate will be 4.55% by September, which is lower than the 4.69% they estimated before the Consumer Price Index (CPI DXY has increased by 0.4% and is currently at 103. The British pound dropped 0.5% versus the American greenback, moving away from the $1.24 level experienced in the beginning of the month, due to new Consumer Price Index data that showed inflation in the UK fell further than expected in January to 10.1%.
Highlighting the strength of the retail sector, total sales from November to January were 6.1% higher than the same period a year ago.
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