US retail sales grew sharply in January as government stimulus payments provided a boost and momentum from 2020’s record holiday season carried over into the new year, with consumer appetite for apparel continuing to grow.
Apparel retailers reported a 5% rise in sales during the month, with the segment maintaining its upward trajectory after a 2.4% increase last month. According to data released by the US Census Bureau, however, sales at clothing stores were down by 11.1% year-over-year.
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Overall retail sales during January were up 5.3% seasonally adjusted from December and up 7.4% year-over-year. That compares with a monthly drop of 1% but a yearly gain of 2.5% in December. Despite month-over-month declines in the last quarter of 2020, sales have grown year-over-year every month since June, according to Census data.
National Retail Federation (NRF) chief economist Jack Kleinhenz says there was none of the falloff in spending that is often found post-holiday and the increase was even better than expected.
“There is plenty of purchasing power available for most consumers, and the pickup in shopping has even been reflected in the number of hours worked by retail employees. Confidence is building thanks to the availability of Covid-19 vaccines and states and local governments are beginning to remove restrictions on economic activity. Going forward, I expect consumer spending to build on this momentum.”
NRF’s calculation of retail sales – which excludes automobile dealers, gasoline stations and restaurants to focus on core retail – showed January was up 5.9% seasonally adjusted from December and up 10.7% unadjusted year-over-year. That compared with a decrease of 2.2% month-over-month and an increase of 7.9% year-over-year in December.
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By GlobalDataNRF’s numbers were up 8.7% unadjusted year-over-year on a three-month moving average.
January’s gains build on momentum seen during the November-December holiday season, when retail sales as calculated by NRF grew 8% year-over-year to a record US$787.1bn, even after being revised down from a preliminary estimate of $789.4bn. For the full year, 2020 was up 6.7% over 2019.
January saw month-over-month increases across the board and year-over-year gains in seven out of nine retail categories, led by electronics and appliance stores on a monthly basis and online sales on a yearly basis.
Clothing and clothing accessory stores were up 5% month-over-month seasonally adjusted but down 11.3% unadjusted year-over-year.
Sporting goods stores were up 8% on last month seasonally adjusted and up 22% unadjusted year-over-year.
2021 will not be a bad year for retail
Neil Saunders, managing director of GlobalData Retail, notes as far as retail is concerned, the new year started on a high note as the new round of stimulus payments, which started to be delivered at the back end of 2020, continued to reach households in January and helped to boost spending among lower- and middle-income consumers.
“This was a shot in the arm for the retail sector and, by our estimates, pushed up spending growth by almost two percentage points.”
He adds despite the overall good numbers, some pockets of the retail economy – such as gasoline stations and foodservice – remain in decline.
In addition, while core retail is strong overall, spending growth is very uneven across categories.
“Apparel stores continue to lose out, with sales down by 11.3%. This number has recovered since the depths of the pandemic, but underlying demand is still weak as large numbers of consumers refrain from buying work and occasion wear. Department stores are also down, but by considerably less than in previous months – largely thanks to a partial recovery in footfall at some malls,” he says.
“Non-store sales, which includes online, grew by 22.1%. While this is strong growth, the penetration has come down since the peaks of November and December as the number of shoppers using physical stores continues to build.
“The outlook for the year ahead is complex. From a demand perspective, there is enough firepower in the economy to maintain good growth through the next couple of months. However, stellar growth will rely on more stimulus being passed. Come March the numbers will start to lap unusual prior year comparatives. This means sectors that were down strongly, such as apparel, will start to post strong growth rates. On the flip side, sectors that grew strongly, like grocery, will post weak growth or declines. All in all, however, 2021 will not be a bad year for retail.”
