WASHINGTON: Retail sales in the United States rebounded in January, said government data released Wednesday, on improving auto supply while policymakers watch for signs that consumer demand is cooling in the longer run. The US central bank has been working to ease demand as policymakers try to rein in stubborn inflation, raising interest rates rapidly over the past year.
While there have been signals that the effects of policy are rippling across sectors including previously resilient consumer spending, the latest data could spark concern. Sales bounced by three percent last month to $697.0 billion after two months of contraction, said a Commerce Department report Wednesday, markedly higher than analysts expected.
Sales at auto and other vehicle dealers provided a boost, jumping 6.4 percent from December to January. Also robust were sales at department stores, which surged 17.5 percent, while that at restaurants and bars spiked 7.2 percent, the report said. Officials are looking for indications that consumers are pulling back, as they consider when to halt their campaign of rate increases.
Rising rent and a gasoline price rebound helped keep US consumer prices elevated in January, according to government data released Tuesday, signaling that policymakers’ battle against inflation is not over. The US central bank has hiked interest rates rapidly in the past year to raise borrowing costs and cool demand in the world’s biggest economy, as inflation skyrocketed.
But even as the consumer price index (CPI), an important inflation gauge, eases from decades-high levels, the numbers point to some stickier areas. With the effects of policy rippling through the economy, the CPI rose 6.4 percent in January from a year ago, according to Labor Department data. This was a touch below December’s figure and the smallest annual increase since October 2021.
But it remains significantly above policymakers’ two percent target. From December to January, the CPI rose 0.5 percent, picking up from 0.1 percent in December and indicating the Federal Reserve has some way to go in lowering costs.
“The index for shelter was by far the largest contributor… accounting for nearly half of the monthly all items increase,” said the report. The indices for food, gasoline and natural gas also contributed.
Excluding the volatile food and energy components, so-called core CPI rose 5.6 percent from January 2022, also the smallest increase in around a year. “There is still more work to do as we make this transition to more steady, stable growth, and there could be setbacks along the way,” said President Joe Biden in a statement. He added that latest data “reinforces that we have made historic progress and are on the right track, and now we need to finish the job.”
There was only modest improvement in annual inflation, as well as in services inflation excluding volatile components and housing, said Rubeela Farooqi of High Frequency Economics.
This measure of underlying services costs is closely eyed by the Fed. “For Fed officials, a slow grind down in inflation only supports the higher-for-longer view on interest rates,” Farooqi warned. While higher interest rates may typically be associated with an uptick in unemployment and demand slowdown, the economy’s resilience lends hope to the possibility that the United States can avoid a major downturn. – AFP