America’s consumers rebounded last month from a weak holiday shopping season by boosting their spending at stores and restaurants at the fastest pace in nearly two years, underscoring the economy’s resilience in the face of higher prices and multiple interest rate hikes by the Federal Reserve.
The government said Wednesday that retail sales jumped 3% in January, after having sunk the previous two months. It was the largest one-month increase since March 2021.
Driving the gain was a jump in car sales, along with healthy spending at restaurants, electronics stores and furniture outlets. Some of the supply shortages that had slowed auto production have eased, and more cars are gradually moving onto dealer lots. The enlarged inventories have enabled dealers to meet more of the nation’s pent-up demand for vehicles.
Whether America’s shoppers can continue to spend briskly will help determine how the economy fares this year. The eight interest rate hikes the Fed has carried out in the past year have raised the costs of mortgages and auto loans as well as credit card interest rates. Inflation has also eroded workers’ paychecks, thereby limiting their ability to spend freely.
Yet for all the challenges, consumers continue to show resilience. Several factors likely helped propel last month’s spending.
