Soaring retail sales show Americans are shrugging off inflation

Americans are once again opening their wallets despite higher prices and a dim view of the economy. US retail sales jumped by 3.8% in January, with online shopping, furniture, car parts, and building materials leading the way, according to US Census Bureau data released on Feb. 16. The increase was larger than expected, and the highest monthly gain since March.

Spending increased despite the onslaught of covid-19 cases during the month, and the highest inflation level in nearly 40 years.

Economists, including at the US Federal Reserve, have been worried that higher prices could derail the economic recovery. Wednesday’s data show little sign of that — though they are not adjusted and reflect the rising inflation rate, the growth in sales has so far outpaced that of prices.

Why Americans are not afraid of spending

Many Americans are emerging from the pandemic in better shape than they entered it. Households have stronger balance sheets partly thanks to the government’s pandemic help, and pay for low-wage workers has been rising faster than inflation.

But shoppers might start to feel thriftier as pandemic government support recedes, and if inflation remains hot, said Gregory Daco, chief economist at EY-Parthenon. In January, they spent less on items whose prices have surged, like gasoline. Sales at bars and restaurants also took a dip.

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