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Retail sales jump as Americans defy inflation

U.S. retail sales rose 3%, or $697 billion, in January, above estimates for them to rise 1.7%, according to FactSet. This sharply retail rebounding came as job growth accelerated and inflation cooled slightly at the start of the year. Retail sales increase signaling that consumer demand remains resilient despite a challenging macroeconomic environment. The Associated Press has the story:

Retail sales jump as Americans defy inflation

Newslooks- WASHINGTON (AP)

America’s consumers rebounded last month from a weak holiday shopping season by boosting their spending at stores and restaurants at the fastest pace in nearly two years, underscoring the economy’s resilience in the face of higher prices and multiple interest rate hikes by the Federal Reserve.

A couple shops for a Volkswagen ID.4 electric vehicle while assisted by a salesman at right, at a new car dealership, Monday, Feb. 6, 2023, in Manchester, N.H. On Wednesday the Commerce Department releases U.S. retail sales data for January. (AP Photo/Charles Krupa)

The government said Wednesday that retail sales jumped 3% in January, after having sunk the previous two months. It was the largest one-month increase since March 2021.

Driving the gain was a jump in car sales, along with healthy spending at restaurants, electronics stores and furniture outlets. Some of the supply shortages that had slowed auto production have eased, and more cars are gradually moving onto dealer lots. The enlarged inventories have enabled dealers to meet more of the nation’s pent-up demand for vehicles.

A shop holds a sidewalk sale during an unseasonably warm day, Friday, Feb. 10, 2023, in Providence, R.I. On Wednesday, the Commerce Department releases U.S. retail sales data for January. (AP Photo/David Goldman)

Whether America’s shoppers can continue to spend briskly will help determine how the economy fares this year. The eight interest rate hikes the Fed has carried out in the past year have raised the costs of mortgages and auto loans as well as credit card interest rates. Inflation has also eroded workers’ paychecks, thereby limiting their ability to spend freely.

lesHeinz Ketchup is displayed at a market in Pittsburgh on Thursday, Jan. 26, 2023. On Wednesday the Commerce Department releases U.S. retail sales data for January. (AP Photo/Gene J. Puskar)

Yet for all the challenges, consumers continue to show resilience. Several factors likely helped propel last month’s spending. About 70 million recipients of Social Security and other government pension programs last month received an 8.7% boost in their benefit checks, an annual cost-of-living adjustment to offset inflation. It was the largest such increase in 40 years.

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