EconoFACTS

February 15, 2023 | 09:10

Back to the Malls

Economist

Jennifer Lee

Senior Economist and Managing Director
Economics

(Read more)

Jennifer Lee

Senior Economist and Managing Director
Economics

(Read more)

"Can i get an extra order of fries on the side? You know what? Make it extra large!"

A rebound in U.S. retail sales was expected....but not this much. The headline 3.0% jump in January was the biggest monthly increase since March 2021, or since 2001 when excluding pandemic times. The revisions to the prior two months were minimal. (Note that sales took a 16.2% dive on a not seasonally adjusted basis but that is the smallest January declines in at least 30 years, outside the pandemic era.) The gains appear to be broad based (one cannot point to one category and declare "but it was only blah blah blah!"). See the table below but as an example: motor vehicles and parts +5.9%, furniture +4.4%, electronics +3.5%, new outfits +2.5% ... you get the idea. And, my favorite indicator of how confident consumers are these days ... dining out surged 7.2% after a flat December and a 0.2% dip in November.

The control measure of retail sales (removes autos, gas, and building materials) bounced back 1.7%, encouraging for the broader economy, after declining for two straight months. Keep in mind that this is only part of the bigger picture .... the PCE report, due out February 24th, will give the official picture on how the consumer fared at the start of the year.

So it looks like real consumer spending rose over 1% in January. It will be very, very interesting to see how revisions will play out with the next release. But this is encouraging news.... Remember we raised our Q1 GDP growth forecast recently (now +0.5% a.r.), and with this release—even with some reversal in February—there is upside risk to our call.

Unfortunately, for financial markets, this is once again the case of good news being bad..... the Federal Reserve will be mulling this over.

Table 1 - United States — Retail Sales

(month/month % change)

Source: BMO Economics, Haver Analytics