Retail Sales Were Higher Than Expected in January

Restaurants and bars saw the biggest sales increases, while inflation overall cooled slightly.

February 16, 2023

ALEXANDRIA, Va.—Retail sales were up 3% in January month over month, reports CNBC, which exceeded expectations. The number is not adjusted for inflation, and when auto sales are removed, sales were up 2.3%.

Leading all major retail categories was restaurants and bars, which increased 7.2% on the month. Gas station sales were flat, despite a 2.4% increase in gas prices last month. No categories declined in sales.

December retail sales were down 1.1%, which was the sharpest decrease last year. The National Retail Federation (NRF) reported that holiday sales were disappointing. Retail sales during 2022’s November-December holiday season grew 5.3% over 2021 to $936.3 billion, falling short of NRF’s forecast amid continuing inflation and high interest rates.

Retail sales were up 6.4% year over year, which was in sync with the Labor Department’s inflation report released earlier this week. The consumer price index was also 6.4% in January, down from 6.5% in December, and was the seventh straight month of decreases following inflation’s peak in June at 9.1% year over year. However, on a month over month basis, the CPI increased 0.5% in January, compared with a previous 0.1% increase. This rise is likely to set the stage for another interest rate increase by the Federal Reserve when it meets in March.

“The monthly reports on industrial production, retail sales and jobs were generally better than expected and point to a pickup in economic activity in early 2023 after a soft patch in late 2022. The Fed will read recent activity reports as supporting plans for additional interest rate increases in the first half of this year,” Bill Adams, chief economist for Comerica Bank, told CNBC.

CNBC reports that several Fed officials spoke on the recent economic reports, and each said they would like to see more progress made on taming the economy and that there is more work to do.

“I am confident that the gears of monetary policy will continue to move in a way that will bring inflation down to 2%. We will stay the course until our job is done,” New York Fed President John Williams said.

Federal Reserve chain Jerome Powell is expecting a bumpy ride to reach the Fed’s goal of 2% inflation. “[It] is likely to take quite a bit of time. It’s not going to be, we don’t think, smooth,” he said at a moderated discussion last week.

Core CPI, which excludes energy and food prices, was up 5.6% year over year, down from 5.7% year over year in December. Many economists believe core CPI is a better predictor of future inflation.

“While the overall trend continues to improve, inflation continues to wield formidable momentum,” Sarah House, senior economist at Wells Fargo, told The Wall Street Journal. “The Federal Reserve is justified in its concern that inflation won’t easily be brought to heel.”

Grocery prices were up 11.3% last month year over year, and while grocery inflation is easing from last summer’s highs, some items are still more expensive. The Journal reports that egg prices in January posted the largest annual increase in nearly half a century. Carbonated drinks jumped the most since 1981. Also, prices at restaurants were up 8.2% in January year over year. Some economists look to dining out costs as a signor of labor-cost pressures.

Economic conditions have had a huge impact on the convenience retail industry in the past two years. At this year’s NACS State of the Industry Summit, John Benson of AlixPartners LLP will share key insights during the “U.S. Economic Outlook for 2023 and Beyond” session. Registration is open at