Cold front tempers January sales
Retail sales increased 0.3% in January, sufficient to keep the 12-month growth rate close to 8%.
Higher gas prices contributed to the increase, as the growth rate was just 0.2% with the effect of auto and gasoline purchases removed.
Expectations for January retail sales were loftier than actual results, perhaps due to strong results in recent months generating a bit too much optimism about the durability of the consumer. Winter storms may have also had a moderating effect on sales for the month as shoppers were less enthusiastic about venturing out.
While below expectations, the results reinforce that consumers are continuing to spend even after the holiday shopping season.
Consumers are seeing an increase in promotions as retailers attempt to keep them shopping during the steady recovery.
Consumer confidence remains below historical averages, though the recent uptick in sentiment has carried it to a 3-year high. As we continue to see gradual progress in the jobs market and consumer confidence, continued improvement in retail sales should follow.