The latest in a string of hotter than anticipated economic data, US retail sales rose significantly in January. If this trend continues, the Federal Reserve may be forced to continue tightening monetary policy for longer in an effort to slow the US economy.
According to a report from the Commerce Department, retail sales increased by 3% in January, far exceeding the 1.8% forecast provided by experts surveyed by Reuters.
Data released recently revealed that American consumer prices increased in January, raising hopes that the Fed will increase the policy rate at least twice more this year, to a range of 5-5.25%.
The S&P 500 has increased 8% so far this year, while the Nasdaq (.IXIC) has regained 15%, driven by a revival in growth stocks that were severely damaged in last year’s stock market slump. A season of quarterly earnings that exceeded expectations has given reason for cautious confidence.
More than half of the S&P 500 businesses have reported quarterly earnings, and about 70% of those have exceeded profit projections. This contrasts with a historical average of 66%.
According to ING’s chief international economist James Knightley, “the milder weather in January encouraged shoppers to leave their houses and spend money.”
The result for January showed a significant rebound from the Christmas season, when retail sales had their worst monthly decline since December 2021. The numbers don’t account for inflation.
The retail control group, which includes sales of construction materials, auto parts, and gas stations, grew 1.7%, exceeding economists’ forecasts for a 0.8% increase.
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