US: Solid Retail Sales due to special factors – Wells Fargo

Retail Sales in the US rose 3.8% in January, the biggest gain since March 2021. Analysts at Wells Fargo, point out the increase handily exceeded consensus expectations and was only partly a function of higher prices. They suspect that part of the increase “may have to do with certain merchandise finally becoming available.”

Key Quotes: 

“Consumer spending may have lost some momentum in the final months of 2021, but today's retail sales report for January says that consumers have swaggered into 2022 undaunted by soaring inflation and soaring COVID cases that month. Our consumer dashboard below is consistent with some improvement in January, but this report shows spending that was suspiciously strong.”

“Gains were broadly based, but concentrated in a few key categories and control group sales, which factor into GDP and exclude food services, auto dealers, building materials stores and gasoline stations jumped 4.8%, that too was the largest monthly increase since stimulus payment went out last March.”

“We still believe the factors that propelled strong growth in consumer spending last year are shifting and, in some cases, have reversed altogether. The biggest factor of all, in our view, is inflation. Most consumers have never seen anything like it, and it is weighing on sentiment and could force some difficult spending decisions for consumers this year. The Fed is well aware of the inflation struggles, and as the Fed removes policy support in a deliberate effort to keep a lid on prices, it will weigh on growth in consumer demand by design.”