Retail sales rebounded from December’s weakness (unrevised at -1.1% m/m), gaining 3.0% month-on-month in January. Today’s reading was a full percentage point higher than the consensus forecast for growth of 3.0%.
Sales at motor vehicle & parts dealers accounted for most gains with a 5.9% m/m gain in January. Gasoline station receipts were flat on the month despite a bounce back in gas prices.
Excluding autos and gas, sales were up 2.6% m/m – also above consensus expectations for a more moderate gain of 0.9% m/m.
Sales at building materials and garden equipment stores – another volatile category – were up 0.3% m/m. Stores in these category have the highest build-up in inventories relative to pre-pandemic average and may come under pricing pressure in the coming months.
Retail sales in the “control group” that excludes the above category and is used as a gauge personal consumption expenditures (PCE), rose by 1.7% m/m from a downwardly revised 0.7% m/m decline in December (-0.5% m/m reported previously). Again, this was above the consensus forecast for an increase of 1.0%.
- Among these, the largest contribution came from food services & drinking places (+7.2% m/m), with sales at general merchandise stores (+3.2% m/m) and non-store retailers (+2.8% m/m) were right behind. Sales at furniture stores, electronics & appliance stores (+4.1% m/m), miscellaneous stores retailers (+2.8% m/m), clothing & accessory stores (+2.5% m/m), and health & personal care stores (+1.9% m/m) each contributed one tenth of a percentage point to today’s gains.
- The weakest growth was reported by food & beverage stores, which gained 0.1% on the month.
Key Implications
Like the weather, consumers mood warmed up for shopping in January. The biggest gains were picked up by auto dealers, where demand for cars was at least partially met by improving supply, as production continues to recover. But other categories prints were also very strong, with the three-months trend in real sales turning positive, gaining 2.8% on the month.
Several indicators suggest that the services sector continues to reclaim its place as the force that steadies the economy. January’s ISM services report that proved December’s contraction was a blip and demand factors are strong. An upward trend in real sales at restaurants and our estimates of leisure and travel activity (based on high-frequency card spend data) further corroborate consumers’ healthy appetite for services spending. With that, we expect consumer spending growth to come in around half a percentage point in the first quarter of 2023.
