In a surprise to many, retail sales increased 3% during the first month of the year.
- Retail sales rose more than expected in January amid growing concerns about inflation.
- The Commerce Department forecasted that sales would rise 1.9%, but the actual growth was 3%, CNBC reports.
- Not counting automobile sales, sales grew 2.3%. Motor vehicle and parts sales saw a 5.9% increase.
- Food and drink industries saw the greatest growth, increasing 7.2%. Home decor and furniture rose 4.4%.
- Though gas prices rose 2.4%, gas station sales were relatively unchanged.
- Electronics and appliances grew 3.5%, while online retailers increased 1.3%.
- Year-over-year, price increases were in line with the consumer price index report, increasing 6.4%.
Why it’s news
While inflation drives up prices, it so far isn’t putting a stop to consumer spending. An uptick in retail spending comes alongside a strong job report in January.
After earlier inflation reports, the Federal Reserve noted that some progress is being made, but there is still more work to do before the Fed reaches its target rates.
“I am confident that the gears of monetary policy will continue to move in a way that will bring inflation down to 2%. We will stay the course until our job is done,” New York Fed President John Williams says.
Economists expect the Fed to increase interest rates by a quarter percentage point at the next two meetings. After that, the Fed is expected to pause and see how the changes have affected inflation, the labor market, and the economy as a whole.
Backing up a bit
A strong jobs report may encourage the Federal Reserve to continue raising interest rates to slow the economy and curb inflation. The continuing strong job market could convince the Fed to push interest rates above 5% and keep them high.
Fed Chair Jerome Powell indicated that the public should expect more rate increases in the future. Experts expect at least two 25-basis-point increases with the possibility of a 50-basis-point increase, Bloomberg reports.
“The Federal Open Market Committee raised its benchmark rate by a quarter percentage point to a range of 4.5% to 4.75% this week. The smaller move followed a half-point increase in December and four jumbo-sized 75-basis-point hikes prior to that,” Bloomberg’s Steve Matthews reports.