US Retail Sales Increase 5.3% in January

Retail Sales Are Up 7.4% Year Over Year

retail sales
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The most recent U.S. Retail Sales Report shows an increase in retail sales in January. Sales were up 5.3% since December and up 7.4% since this time last year. Total sales for November through January were up 4.6% year over year. Sales had been increasing since June after record lows were seen in the spring during the height of the coronavirus pandemic, but infections have been on the rise and many households are still experiencing unemployment, leading to a dip of 1.0% in December. January's increased numbers are a promising sign.

Key Takeaways

  • U.S. retail sales saw a 5.3% month-over-month increase in January 2021.
  • Sales were up year over year by 7.4%.
  • Retailers that saw monthly sales increase include online retailers, and sporting goods, hobby, musical instrument, and book stores.

Clothing and accessory stores saw a 5.0% increase from December, but sales were down 11.1% unadjusted year over year. Department store sales were up 23.5% from December, as were sporting goods, hobby, musical instrument, and book stores, which saw an increase of 8.0% month over month.

Online and other non-store sales increased by 11.0% last month and were up 28.7% unadjusted since January 2020. This reflects consumers continuing to shop online due to the ongoing pandemic. Health and personal care stores, such as drug stores, saw an increase of 1.3% from December and an increase of 6.2% year over year. Building and garden supply stores saw a month-over-month increase of 4.6% and a 19% increase year over year.

Restaurant and bar sales saw a 6.9% increase from December, but sales are down 16.6% from this time last year. Food and beverage stores are up 2.4% month over month and were up 11.8% unadjusted year over year.

Car and parts dealers saw an increase in sales of 13.0% year over year and increased 3.1% month over month. Gas station sales were up 4.0% since December and were down 7.8% since December 2020.

The Retail Sales Report Can Predict Economic Growth

The U.S. Census Bureau report measures the U.S. retail industry each month by surveying about 5,500 employer firms to collect retail sales data. It shows the total sales and the percentage change for that month and also reports on the percentage change in year-over-year (YOY) sales for the last 12 months.

Retail sales signal trends in consumer spending, which drives almost 70% of economic growth. The retail industry alone supplies almost 52 million jobs. In addition to retail, personal consumption expenditures include services like housing and health care. 

Since the retail sales report comes out monthly, it is a more current measurement of economic health than gross domestic product, which is reported quarterly. You can use the retail sales report to predict GDP before that news comes out. Keep in mind that the retail sales report doesn't adjust for inflation, while GDP does.

To predict GDP, look at year-over-year retail sales. 

GDP is an annualized number. GDP growth compares this annualized figure to the prior year. Keep in mind that GDP growth uses real GDP figures and they eliminate the effects of inflation. The YOY retail sales reports use nominal GDP figures. GDP growth reports and YOY retail reports could have significant differences if inflation is very high or if there is deflation

When using the retail sales report for forecasting, you should also look at other statistics. Most importantly, look at orders for durable goods—that's another great leading economic indicator. 

Pay attention to forecasts for specific holiday sales. The National Retail Federation (NRF) surveys shoppers to find out how much they plan to spend on the major holidays. The report on Halloween spending provides early clues for the holiday shopping season. The NRF also reports on retail sales for Valentine's Day, Mother's Day, Father's Day, and Back to School. 

About 20% of annual retail sales occur during the holiday season.

Retail Sales Outlook

In February 2020, the NRF had predicted 2020 retail sales would grow between 3.5% and 4.1%. That was before the COVID-19 pandemic caused states to issue shelter-in-place orders. Just one month later in March 2020, the National Retail Federation predicted that the industry would lose $430 billion in revenues in the third quarter of 2020. At least 630,000 non-essential retail outlets have already closed during the pandemic.

Jan Rogers Kniffen, a retail industry consultant, estimated that 30 well-known brands might be forced to file for bankruptcy protection, according to an article by PYMNTS.com. Many retailers may have trouble meeting loan obligations. and apparel retailers may have a hard time selling out-of-season apparel. They may have to cancel orders with manufacturers, too.

Retailers saw improved sales as shelter-in-place orders were lifted, but a real recovery won't occur until significantly more people are vaccinated. In this pandemic, the future of retail depends on a virus.