With the arrival of stimulus, tax refunds, and health developments, sales in U.S. retail and food service industries surged to record-highs in January in spite of the coronavirus.
Sales in U.S. retail and food service industries surged in January thanks to additional government stimulus, ending a three-month decline. Month-over-month, January sales were up 5.3% compared with December, according to data released by the Census Bureau on Feb. 17. Calculated year-over-year, the increase was a stunning 7.4%. Total sales came out to $568.2 billion and blew past the previous monthly record ($552.8 billion) set in Sept. 2020.
Normally, January is a slow month for retailers, but nothing has been normal about the past year. In January, the improvement in retail sales came despite a continued COVID-19 surge, which brought grim records in daily U.S. deaths and cases. But consumers are learning to adapt and are spending despite the virus. The data indicates that many consumers were quick to part with the $600 they received from the federal government in early January.
The January gains were broad-basedEvery major category showed month-over-month improvement. Electronics and appliance stores posted a 14.7% monthly gain, furniture stores were up 12% and sales by nonstore retailers (e-commerce websites such as Amazon.com) grew 11%.
Some recently downtrodden sectors notched meaningful improvement as well. The “food services and drinking places” grouping – a bellwether for in-person activity – was up 6.9% in January. Of course, that’s still down meaningfully (16.6%) from the previous year. We even saw signs of life from department stores (+23.5% in January, down 3.0% year-over-year) and clothing retailers (+5.0% in January, down 11.1% year-over-year).
This data is an important counterpoint to the growing fears that the U.S. could be headed for a double-dip recession. It’s a complicated issue because technically, the National Bureau of Economic Research hasn’t declared the (initial) COVID-19 recession to be over yet. Their decisions tend to lag, however. The Bureau of Economic Analysis reported that U.S. GDP expanded in the third and fourth quarters of 2020 (although the deep decline in the first half of the year still left the full year in the red).
Retail sales cratered, like so many other things, in March and April of 2020. They recovered all of those losses in May and June, making for a true V-shaped recovery. Growth since then has been mixed, however. Modest dips followed small gains in the third quarter in the fourth quarter. The expansion had lost momentum. That all changed in January.
See also: My 2021 credit card predictions
What happens next
I think February will bring a temporary slowdown for retailers. Cold and snowy weather has gripped much of the nation, including unusual (and populous) locations like Texas, which has prompted many stores and restaurants to close temporarily. Though so much spending has shifted to online, I still believe the harsh weather will be a drag on February sales.
Also, while February could still benefit to some extent from the January stimulus payments, most of that impact has probably already been felt. The next round of stimulus payments will likely arrive in March – which should coincide with tax refunds for many households.
March could be a huge month for consumers, between more stimulus, tax refunds and warmer weather. The virus ebbed a bit in February and hopefully, that trend will continue. Wider vaccine availability will provide a big boost, too. I’m optimistic that the spring will lift moods and fortunes. While the pandemic won’t be over yet, the worst is hopefully behind us.
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