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Consumers Go on Huge Retail Sales Shopping Spree in January After Months of Weakness

February 15, 2023

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3:39 pm

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20 comments

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Economics

Retail sales from commerce department, chart by Mish

Advance Retail Sales

Today, the Commerce Department released Advance Retail Sales Data for January.

Advance estimates of U.S. retail and food services sales for January 2023, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $697.0 billion, up 3.0 percent (±0.5 percent) from the previous month, and up 6.4 percent (±0.7 percent) above January 2022.
Total sales for the November 2022 through January 2023 period were up 6.1 percent (±0.5 percent) from the same period a year ago.
The November 2022 to December 2022 percent change was unrevised at down 1.1 percent (±0.3 percent).
Retail trade sales were up 2.3 percent (±0.5 percent) from December 2022, and up 3.9 percent (±0.5 percent) above last year.
Food services and drinking places were up 25.2 percent (±2.6 percent) from January 2022, while general merchandise stores were up 4.5 percent (±0.2 percent) from last year.

Advance Retail Sales Month-Over-Month Other Details

A key point to note is that retail and food services sales are adjusted for seasonal variation and holiday and trading-day differences, but not for price changes.

The nominal charts above show weakness for just a couple of months, In real (inflation adjusted) terms the sales reports look much worse.

Advance Retail Sales Real vs Nominal

*Advance Retail Sales adjusted by the CPI, chart by mish*

In six of the last eight months of 2022, inflation-adjusted retail sales declined.

Real vs Nominal Advance Retail Sales in Millions of Dollars

The above chart puts things into proper perspective. Inflation-adjusted retail sales peaked in March of 2021 on a third round of totally unwarranted fiscal stimulus.

The 2022 peak in real sales was also in March.

Nonetheless, this renewed strength will give the Fed more impetus for still more rate hikes and it adds to the no-recession yet debate as well.

CPI Accelerates 0.5 Percent in January, Up 6.4 Percent From a Year Ago

The Consumer Price Index rose 0.5 percent in January and that is on top of an upward revision in December from -0.1 percent to +0.1 percent.

For a look at the CPI numbers used to calculate real sales, please see CPI Accelerates 0.5 Percent in January, Up 6.4 Percent From a Year Ago

How Long Will High Inflation Persist? What Happened to the Great Moderation?

For a longer-term outlook, please see my report How Long Will High Inflation Persist? What Happened to the Great Moderation?

This post originated on MishTalk.Com.

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20 Comments

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david halte

3 years ago

Many workers received pay raises in January. Federal employees claimed an average pay increase of 4.6 percent. Minimum wage workers received hefty wage increases.

Consumer reporter Dave Ramsey has said, people spend to an amount that keeps their monthly debt payments the same. If auto loan rates are decreased, consumers will purchase a more expensive car that matches their monthly payment. With this same financial logic, workers that received raises will increase spending, as long as their level of debt remains the same. Credit card debt should remain constant, even though household wages increased.

Higher short-rates increase interest on credit cards and raise the overall balance. The higher balance will discourage spending, as consumers will attempt to bring the monthly payments back in line.

NaetG

3 years ago

Hey Mish,

Exactly as we saw with the latest BLS report, the retail spending report was magically seasonally adjusted, aka manipulated, into increased retail sales. As a reminder, the unadjusted employment numbers showed a decline of 2.505 million jobs, but after seasonal adjustments, they suddenly showed a gain of 517,000 jobs MoM. That’s a seasonal adjustment of 3.022 million jobs. I’m no expert, but I’ve read economic reports for going on 30 years now and can’t recall any seasonal adjustment anywhere near this magnitude.

This latest CPI report showed unadjusted sales in December at $748,243 billion compared to January’s $627,311 billion. Somehow, seasonal adjustments changed that $120,932 billion sales decline into a $20,057 billion sales increase.

If you look at every single retail category, they showed declining sales MoM in unadjusted figures, but were all revised into MoM sales increases when seasonally manipulated.

If I understand things correctly, unadjusted numbers are exactly as the data comes in and is tabulated. Seasonal adjustments are more or less just manipulating the numbers in one direction or the other. In this case, people spend less in January than they did during Christmas, so the numbers are better once we remove whatever we think consumers spent for the Christmas season.

To me, it seems like reality showed that retail sales declined 16.16% MoM, but somehow, seasonal adjustments turned that into a retail sales increase of 2.96%.

The seaonal adjustments for clothing and clothing accessories stores was even more absurd.

I’d love to hear your take on these seemingly wildly outrageous seasonal adjustments turning data that shows a declining economic environment into data that shows the economy is “strong as hell” as I recently heard it explained.

Quagmire46

3 years ago

Could these numbers be ‘revised’ lower also?

Doug78

3 years ago

High inflation increases money velocity because since the value of money is declining it makes sense to spend it on assets.

vanderlyn

3 years ago

ain’t NO recession old sport. i don’t give a hooey about the US GOV lying BLS. take out the L, and you got BS. i still cannot find one soul who cannot find a job. the FED is reloading their bazooka so when their owners, need another bailout they got the ammo.

KidHorn

3 years ago

When are gift certificate sales counted? Maybe there were a lot more gift certificate presents than usual.

The whole gain is seasonal adjustments. Like every other good economic metric. I can’t believe people are spending more when there are layoff announcements every day. Never happened before in my lifetime.

Salmo Trutta

3 years ago

The
economy is being run in reverse. Incomes aren’t keeping up with inflation.
Contrary to the pundits, money is not neutral in the long run.

Avery

3 years ago

Stock up on gas stoves and cooktops.

Zardoz

3 years ago

Reply to Avery

Panicked into pointless consumption to virtue signal.

Billy

3 years ago

Looks like no one got what they wanted for Christmas so they went out and bought it for themselves.

MJS357

3 years ago

Reply to Billy

$3000 kayak with a lith battery and accessories. I spent almost $4k om myself, because I can. Gen x spend money on themselves, millennials dropping money for “experiences” rather things. All credit card, purchases, pay off every month even if dipping into savings a little. PPL still going out to eat, drink, and socialize. PPL like me, if we have the money we are spending more than saving it. I can’t take it with me, Might a well enjoy life and ability to do things before, you can’t.

Quagmire46

3 years ago

Reply to MJS357

My wife and I worked our whole adult lives. We lived modestly and saved our money. Last week we did a calculation of just how much can we spend down our savings assuming a long life. We were surprised. We booked a great vacation for this year. I wonder how many other ‘boomers’ have come to the same conclusion.

MJS357

3 years ago

Reply to Quagmire46

As a “X” closer o boomer, all my friends are in agreement that the idea of leaving an inheritance” as it was long ago is NOT the plan. Many have paid for some or all of their kids education. That’s it, congratulations on your academic achievement now go make your own money. People are spending, some a little more wildly then others due to FOMO.

Tony Bennett

3 years ago

Powell’s “higher for longer” got a boost with uber dove leaving for WH.

“Lael Brainard submits resignation as Vice Chair and a member of the Federal Reserve Board, effective on or around February 20, 2023”

https://www.federalreserve.gov/newsevents/pressreleases/other20230214a.htm

Tony Bennett

3 years ago

“Consumers Go on Huge Retail Sales Shopping Spree in January After Months of Weakness”

…

Yes … BUT … when you get a blowout there is likely a reason(s).

1) January is a month where seasonal adjustments play a large role. And when the weather is nice …

“The new year started off on a very warm note across the U.S., with the nation seeing its sixth-warmest January on record, according to scientists from NOAA’s National Centers for Environmental Information (NCEI).”

https://www.noaa.gov/news/january-2023-was-nations-6th-warmest-on-record

2) Social Security COLA kicked in. Big Time.

“Social Security and Supplemental Security Income (SSI) benefits for approximately 70 million Americans will increase 8.7 percent in 2023, the Social Security Administration announced today. On average, Social Security benefits will increase by more than $140 per month starting in January.”

https://www.ssa.gov/news/press/releases/2022/#10-2022-2

KidHorn

3 years ago

Reply to Tony Bennett

Spending went up a lot more for retiree aged people than younger people. Social security explains that.

vanderlyn

3 years ago

Reply to Tony Bennett

thanks sleepy joe. i used the increase to spend more on my favorite indulgences. food and banyas. and therapeutic massages.

MJS357

3 years ago

Reply to Tony Bennett

I got a $6K raise thanks to COLA and wage increase for DC area. Yes, I am spending it.

oee

3 years ago

We are going to have a recession …anytime now. How are these numbers recessionary?

Tony Bennett

3 years ago

Reply to oee

Recession will show. Credit (finally) started to tighten Q4.

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Consumers Go on Huge Retail Sales Shopping Spree in January After Months of Weakness

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