Additional fiscal stimulus powers US retail sales

    178
    Shoppers wait in line at Coastal Grand Mall on Black Friday in Myrtle Beach, South Carolina on Nov. 27, 2020.

    WASHINGTON- US retail sales rebounded sharply in January after households received additional pandemic relief money from the government, suggesting a pick-up in economic activity after being restrained by a fresh wave of COVID-19 infections late last year.

    The largest gain in retail sales in seven months reported by the Commerce Department on Wednesday was across the board, and ended three straight monthly decreases. The acceleration in activity at the start of 2021 was evident in other data showing strong growth in production and prices at factories last month.

    Still, the solid economic data did not argue against President Joe Biden’s $1.9 trillion recovery plan. Millions of Americans remain unemployed. Though COVID-19 infection and hospitalization rates have declined, new strains of the virus pose a risk to the economy fully reopening.

    “The economy picked up steam in January and inflation came along for the ride,” said Joel Naroff, chief economist at Naroff Economics in Holland, Pennsylvania. “Since President Biden is intent on getting a major bill through, look for that to happen and for government money to continue to get into the hands of households and businesses.”

    Retail sales surged by a seasonally adjusted 5.3 percent last month after decreasing 1.0 percent in December. Economists polled by Reuters had forecast sales increasing 1.1 percent in January.

    Retail sales increased 7.4 percent from a year ago. Sales last month were led by motor vehicles, with receipts at auto dealerships accelerating 3.1 percent. Sales at clothing stores soared 5.0 percent. Consumers also stepped up spending at restaurants and bars, boosting receipts 6.9 percent. Still, sales at restaurants and bars were down 16.6 percent compared to January 2020.

    Receipts at electronics and appliance stores powered ahead 14.7 percent and sales at furniture stores surged 12.0 percent. There were also hefty increases in sales at sporting goods, hobby, musical instrument and book stores.

    Receipts at food and beverage stores rose solidly, as did those at building material stores. Online retail sales jumped 11.0 percent after dropping 7.3 percent in December.

    The government approved another coronavirus rescue package worth nearly $900 billion at the end of December, which included $600 checks to mostly low-income and some middle-income Americans. The bulk of the money was disbursed in early January, which supported discretionary spending last month.

    The package also extended a government-funded weekly unemployment subsidy as well as benefits for millions of people who do not qualify for state unemployment programs as well as those who have exhausted their six months of eligibility. These benefits are set to expire in mid-March. – Reuters