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US Retail Sales Surge as Consumers Shrug Off Inflation, High Interest Rates

Sales rose 0.7% month-over-month — about double what many economists had predicted. Year-over-year, that’s a 4% jump. 

Photo of an indoor shopping mall
Photo by Mostafa Meraji via Unsplash

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Every bit of good economic news seems to come with a Jerome Powell caveat these days. 

The Commerce Department reported Monday that retail sales rose 0.7% month-over-month — about double what many economists had predicted. Year-over-year, that’s a 4% jump. 

Always Be Spending

The figures aren’t adjusted for inflation, so even as prices and borrowing costs remain high, it’s as Bankrate’s Ted Rossman told the Associated Press: “Americans are actually buying more stuff.” 

  • Sales at general merchandise stores rose 1.1%, while online sales were up 2.7%. Sales at restaurants and other eateries — a key indicator of household finances — rose 0.4%. The increased activity was fueled by rising wages and a strong jobs market, which averaged 276,000 new employees per month in the first quarter of the year.
  • However, plenty of sectors experienced dips. Motor vehicle and car part sales slipped 0.7%, likely as a result of insurance premiums surging 22% in the past year. Furniture sales declined 0.3%, as mortgages remained expensive and home purchases fell. Receipts for electronics, clothes, and hobby-related items also dropped, highlighting how many consumers are scaling back on non-essentials.

As a result of the good-ish news, Morgan Stanley economists raised their GDP growth estimate for Q1 to 2.7% from 2.4%, Reuters reported.

Are We There Yet? By the end of last year, Powell’s Fed seemed a little more optimistic, hinting that a rate cut this summer — or even by the spring — wasn’t entirely out of the question. Well, now we have our answer: No. Even though many continue to feel pain at the pump and the grocery store, spending and inflation data remain too strong to warrant cutting rates, which currently sit between 5.25% to 5.5%. The most realistic hope is that rate cuts begin in September. We’re crossing our inflation-adjusted fingers and toes.