NEW YORK — Americans rapidly picked up the spending pace in January as the threat of omicron faded and there was some easing of supply shortages.
Retail sales surged a seasonally adjusted 3.8% last month, nearly double what most economists had expected. Sales in December had slid 2.5% according to revised figures released Wednesday by the U.S. Commerce Department.
Surging inflation likely pumped up the numbers further in January.
Retail sales rose almost across the spectrum. Sales at general merchandise stores, department stores and furniture retailers also saw strong upticks. Online sales surged 14.5%.
However, with omicron cases exploding in early January, sales at restaurants slipped 0.9% from the month before. And gasoline sales fell 1.3% last month, possibly a result of the cost for a gallon and omicron infections which rose in tandem.
“Consumers say they are worried about inflation, but they continue to spend,” said PNC Chief Economist Gus Fauch. “Even taking into account the December decline, retail sales in recent months have been increasing much faster than prices, so households are purchasing larger volumes of goods and services, not just paying higher prices.”
That spending has been heavily weighted toward goods, things people can own. But as COVID-19 cases decline, Americans are again expected to begin spending more in on concerts, movies and dinners out.
But there is no sign of a letup in spending on goods for the same reason that people will likely start going out more.
The New York clothing company Untuckit has registered a rebound in recent weeks with more people preparing for an eventual return to the office, said co-founder and CEO Aaron Sanandres. Traffic at stores in large cities like New York and Chicago is picking up, he said.
“I am optimistic that this time there is a bit more momentum,” Sanandres said.
The omicron variant that emerged in late November caused widespread worker shortages with so many people calling out sick. Yet the wave of the most recent variant appears to have been short-lived and infections began to decline by mid-January as fast as they rose late last year. Cases have plunged from 436,000 a day two weeks ago to 136,000 Monday.
What is rising is inflation, reaching heights not seen in four decades to wipe out pay raises and potentially eliciting a more forceful response from Federal Reserve, which is expected to begin raising interest rates to cool the economy.
Yet volatility in retail sales data is emerging after the pandemic and related supply crunches drastically altered the behavior of Americans, particularly at the end of 2021. Major retailers companies urged people to shop early to avoid shortages and Americans did, in massive numbers.
After sales rose in October and November, there was a significant spending downturn in December, a month traditionally very big for retail.
By January, despite inflation in headlines everywhere, Americans appeared ready to renew spending.
Joseph Aquino, who runs a real estate services firm in New York, says leasing activity for retail spaces is also picking up. The sector was heavily damaged over the past two years. Rents on Madison Avenue were going anywhere from $1,500 to $1, 800 per square foot before the pandemic, Aquino said. The same space is now going for between $600 to $800 per square foot.
“There is a sense of optimism, ”Aquino said. “People are realizing that the virus is slowly dissipating.”
Consumer prices soared 7.5% last month compared with January 2021, the steepest year-over-year increase since February 1982 as the U.S. economy raced out of pandemic-induced recession. Americans, many flush with cash and ready to spend, collided with a lack of supply as surging demand created global supply chain backups, pushing prices higher still.
The retail report released Wednesday covers only about a third of overall consumer spending and doesn’t include services such as haircuts, hotel stays and plane tickets.
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