Gregory Heym is Chief Economist at Brown Harris Stevens. His weekly series, The Line, covers new developments to the economy, including trends and forecasts. Read on for the latest report and subscribe here to receive The Line in your inbox.
We received a nice surprise last Wednesday, when the Commerce Department announced that retail sales rose 3.8% last month. This was much better than the 2.1% growth economists were looking for, and the biggest monthly increase since March 2021.
What makes this data really impressive is that consumers are spending so much money at a time when inflation continues to surge. Remember that retail sales fell 2.5% in December, and were up just 0.7% in November.
If you’re thinking this increase is solely due to rising prices, remember that the consumer price index was up 0.6% in January, so even after adjusting for inflation, retail sales were up about 3% last month. "Core" sales, which exclude volatile categories like auto and gasoline sales, were also up 3.8% last month, so we can’t pin it on those products.
The biggest increases in sales last month occurred in non-store retailers—aka online sales (+14.5%) and furniture and home furnishings (+7.2%). Sporting goods, music, and bookstores posted the largest drop in sales (-3.0%), followed by a 1.3% decline at gasoline stations. Gas prices fell 0.8% last month, so the decline in receipts at gas stations isn’t that surprising.
So, despite all the concern over inflation and COVID-19, consumers spent big in January. That’s certainly good news after the weak spending data of the prior few months. And since consumer spending is 70% of gross domestic product, it makes the forecast for economic growth in the first quarter look much better.
2021 Was a Rough Year for Homes
According to the National Oceanic and Atmospheric Administration, the U.S. had 20 separate weather and climate disasters last year that caused at least $1 billion in damages. A separate study by CoreLogic found that these natural disasters impacted about 1 in 10 homes last year. That means over 14.5 million homes were hurt by disasters, with a total of almost $57 billion in property damage. Winter storms were public enemy number one in 2021, impacting 12.7 million homes and causing $15 billion in property damage. Hurricanes came in second, followed by tornadoes and hailstorms. To all whose homes took a beating last year, here’s hoping you have a quick recovery and some better luck in 2022.