US retail sales rise 0.2% in January

US retail numbers bounce back in January after a lackluster December report.

US dollar after US retail sales rises Source: Bloomberg

The US retail industry has rebounded after a disappointing December 2018 report, the worst in almost 10 years. Retail sales slightly increased by 0.2% in January.

Why did US retail sales recover in January?

US retail sales improved in January after an increase in purchases of building materials. There was also an uptick in spending because consumers had wage growth in January as well. Eight of the 13 major retailers saw jumps in spending, like food markets and sporting goods stores.

Ian Stephenson, chief economist at Pantheon Macroeconomics, said that the good news about US retail sales was mixed in with negative results as well because December’s numbers will be revised down.

‘The January details show that the rebound was uneven, with big gains in building materials (3.3%), sporting goods (4.8%), and non-store retailers (2.6%) but weakness in furniture (-1.2%), and electronics (-0.3%), while department store sales were little changed after a huge 3.0% drop,’ wrote Stephenson in a note.

Stephenson also noted that the slight growth could impact future retail sales.

‘Overall, these data signal a clear increase in total consumers’ spending in January, but the adverse base effect from December’s drop - which will be revised down - means that Q1 real consumption will struggle mightily to reach 2% growth, and a mere 1% is entirely possible,' wrote Stephenson.

How will US retail sales data affect the Fed?

Though US retail sales data were better-than-expected, the figures still aren’t enough to stop concern about an economic slowdown. A cooling in retail sales could help the US Federal Reserve put a hold on increasing interest rates. In a recent interview, Fed chair, Jerome Powell, said that the US central bank was ‘of course watching’ January’s numbers.

Powell noted that he would take a cautious approach before deciding to raise interest rates.

‘We[The Fed] would be patient as we watch how our own economy evolves,’ said Powell.

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