US retail sales rebounded sharply in January after households received additional pandemic relief money from the government, suggesting a pick-up in economic activity after being restrained by a fresh wave of Covid-19 infections late last year.
Retail sales surged by a seasonally adjusted 5.3 per cent last month, the Commerce Department said today.
Data for December was revised down to show sales decreasing one per cent instead of 0.7 per cent as previously reported.
Economists polled by Reuters had forecast retail sales increasing 1.1 per cent in January.
Excluding automobiles, petrol, building materials and food services, retail sales jumped six per cent last month after dropping by revised 2.4 per cent in December.
These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. They were previously estimated to have declined 1.9 per cent in December.
The government approved another coronavirus rescue package worth nearly $900bn (£650bn) at the end of December, which included $600 cheques to mostly low-income and some middle-income Americans.
The bulk of the money was disbursed in early January, which supported discretionary spending last month.
The package also extended a government-funded weekly unemployment subsidy as well as benefits for millions of people who do not qualify for state unemployment programs as well as those who have exhausted their six months of eligibility.
Neil Birrell, chief investment officer at Premier Miton, said the increase in cashier tills ringing could create a headache for President Biden:
“Recent retail sales and jobs data has been uninspiring with consumer sentiment under pressure but today’s retail sales number, which is a key data point this week, was way, way ahead of expectations.
“It will add fuel to the reflation trade. It is also bad news for Biden, it is likely to make it more difficult for him to get his support package through.”