Retail Sales Climb as Consumers Get Less Bang for Their Buck

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As inflation cooled down slower than expected in January and overall consumer prices rose 0.5 percent compared to the previous month, U.S. consumers showed little signs of frugality. According to preliminary estimates from the U.S. Census Bureau, total retail sales, including spending at stores, online and in restaurants, amounted to $697 billion in January, up 6.4 percent from January ’22 and 3 percent from December, when retail sales had dipped for the second consecutive month.

While a 6.4 percent year-over-year increase in retail sales makes it sound like consumers are bursting with confidence, spending freely, it’s important to note that virtually all of that increase is attributable to higher prices. After all, inflation was also at 6.4 percent in January. Looking at retail sales in constant 1982-84 dollars, retail sales were virtually unchanged compared to January ’22, while climbing 2.4 percent compared to the previous month.

As the following chart shows, much of the latest surge in retail sales can be attributed to rising prices, as consumers are simply getting less bang for their buck. However, even adjusted for inflation, consumer spending looks robust, having yet to decline in face of the latest inflation surge.

This chart shows monthly retail and food services sales in the U.S. since 2010.