Consumer spending surged in January amid soaring inflation, the Commerce Department announced Wednesday.
Retail sales grew 3.8% in January, far exceeding the 2.1% Dow Jones estimate, the Commerce Department announced Wednesday. January’s figure represents the largest monthly increase since March 2021 and a significant snapback from December 2021 when sales decreased by 2.5%.
Consumers boosted retail sales as inflation continued to grow at its fastest pace in almost 40 years.
The Consumer Price Index (CPI) grew 0.6% in January, bringing the key inflation indicator’s year-over-year increase to 7.5%. Meanwhile, the Producer Price Index (PPI), which measures price increases at the wholesale level, surged 1% in January and reached 9.7% on a year-over-year basis.
“2022 is going to feature this very delicate rebalancing act for the entire economy, and in particular for U.S. consumers living in this world where prices are higher and purchasing power is more constrained,” Gregory Daco, chief economist at EY-Parthenon, told The Wall Street Journal.
Consumer spending was broad-based, increasing sharply with more purchases of cars, furniture and building materials, according to the Commerce Department’s report. Online sales also increased overall while bars and restaurants saw a dip after the emergence of the Omicron coronavirus variant.
“The rapid improvement in the public health situation is setting the stage for robust consumption growth in the months ahead, with the rotation of spending towards services likely to regain some traction,” said Lydia Boussour, lead U.S. economist at Oxford Economics, Al Jazeera reported.
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