Summary: US retail sales jump in January; rise much, much higher than expected figure; increase a “brisk start”; reversal in Feb expected given cold weather, new restrictions; growth in all retail categories; “non-store retailers” the largest influence on total.
US retail sales had been trending up since late 2015 but, commencing in late 2018, a series of weak or negative monthly results led to a drop-off in the annual growth rate below 2.0% by the end of that year. Growth rates then increased in trend terms through 2019 and into early 2020 until pandemic restrictions sent it into negative territory. A “v-shaped” recovery has since taken place.
According to the latest “advance” sales numbers released by the US Census Bureau, total retail sales jumped by 5.3% in January. The gain was much, much higher than the 0.8% increase which had been generally expected and in stark contrast to December’s -1.0% after revisions. On an annual basis, the growth rate increased from 2.5% to 7.4%.
ANZ economist Daniel Been described the increase as “a very brisk start to the year for consumption…”
The report was released on the same day as January PPI figures, January industrial production numbers and the minutes of the FOMC’s January meeting. Despite the robust figures, US Treasury bond yields moved lower across the curve, aided by a paragraph in the minutes which stressed the need to “abstract from temporary factors affecting inflation”. By the end of the day, the 2-year Treasury yield had shed 2bps to 0.10%, the 10-year yield had lost 4bps to 1.27% while the 30-year yield finished 5bps lower at 2.04%.
NAB Head of FX Strategy within its FICC division Ray Attrill said, “February seems bound to see a correction, especially given the Arctic weather and as new restrictions came into effect following President Biden’s inauguration.” However, he noted “another surge in spending is to be expected” should the Biden administration’s proposed fiscal package be passed by the US Congress.
Growth was recorded across all categories over the month. The “Non-store retailers” segment provided the largest influence on the overall result. Sales in this segment increased by 11.0% over the month and by 28.7% on an annual basis.