It is well known that inflation is impacting the prices of goods and services. Everything is getting more expensive, but retail sales in January surged anyway. US retail sales increased by 3% last month, which is the biggest rise since March 2021. However, the data that was reported does not account for price changes, so inflation partly contributed to this increase. Spending might have also increased due to the fact that many older Americans' incomes were increased by an 8.7% cost of living adjustment in social security checks.
The Fed has been raising interest rates in hopes of slowing demand which could cool the economy down and stop rising prices. Although some parts of the economy seem to be ready to start accelerating again. It appeared in previous months, like December 2022, that consumer spending was slowing, but this hasn't stayed constant into 2023. Part of the strong consumer demand comes from a strong labor market.
Some economists believe that the Fed needs to do more to get a hold on inflation, while others believe that the January increase was just a one-off blip. Data from the coming months will provide key insights into how effects the Fed's policies are.
https://www.nytimes.com/2023/02/15/business/retail-sales-january-inflation.html
It's interesting to see consumer spending on retail increase like we've seen consumers spending on eating out increase as well. I guess we really could point to all the job additions that occurred during January, even despite the massive layoffs from tech companies. It seems thus far that the Fed has done a good job, but that is still yet to be determined fully.
ReplyDeleteIt is also interesting to see what consumer spending does during periods of inflation in the months leading up to the holidays because typically, those are big shopping periods, but with rising prices it may be different with inflation.
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