US retail sales growth exceeded expectations in January; Fed may raise interest rates again to curb inflation

It is learned that the latest data shows that US retail sales in January increased by 3% year-on-year, far exceeding the 2% increase expected by economists, marking the largest increase since March 2021.

Compared with the 1.1% drop in December last year, US retail sales in January achieved a reversal of growth, which shows that US consumer demand is recovering, but the increase in consumption may further push up the inflation level.

Sales increased in nearly every retail category last month, with auto dealers, furniture sellers and electronics stores reporting notable gains; department store sales were up 17.5%, a surprising gain given that the post-holiday shopping season is typically the slowest for department stores.

Consumption in January was also likely boosted in part by a big 8.7% cost-of-living adjustment that began rolling into Social Security checks last month, boosting the incomes of many older Americans.

As prices continue to rise, high inflation has also driven sales growth to a certain extent. Although demand has picked up, some retailers are wary of the upper limit of consumers' acceptable prices and dare not raise prices easily.

At the same time, rising consumer demand amid high U.S. inflation could make it harder for the Federal Reserve, which has been raising interest rates over the past year to try to curb consumer demand, to curb it.

But now it seems that these adjustments may have only temporarily weakened consumer demand and did not have a long-term effect. The weak performance of US retail sales growth in December last year may be due to cold weather and the result of the early holiday season.

Fed officials have signaled they may raise interest rates, projecting them to climb to a range of 5% to 5.5%, slightly above the median of the central bank’s latest forecasts, but they have also added that rates could go even higher if inflation proves difficult to slow.

However, some economists believe that the demand growth in January may be related to abnormally warm weather and may reverse in the coming months.

Editor✎ Ashley/

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