Driving the gain was a jump in car sales, along with healthy spending at restaurants, electronics stores and furniture outlets
WASHINGTON — America’s consumers rebounded last month from a weak holiday shopping season by boosting their spending at stores and restaurants at the fastest pace in nearly two years, underscoring the economy’s resilience in the face of higher prices and multiple interest rate hikes by the Federal Reserve.
Wednesday’s robust retail sales figures, along with a strong January job report, suggest that the economy remains durable, perhaps even strengthening, and at little risk of succumbing to a recession anytime soon. Earlier this week, economists at Goldman Sachs reduced the likelihood of a recession this year from 35% to just 25%.
Some of last month’s retail sales gain probably reflected unusually warm weather, which might have encouraged more people to buy cars, go shopping and eat out. The government’s seasonal adjustment process also likely helped boost January’s figure. Its seasonal adjustments aim to modify sales data for typical calendar patterns. An example is a spike in spending during the holiday shopping season and then a drop in January.
Whether America’s shoppers can continue to spend briskly will help determine how the economy fares. The eight interest rate hikes the Fed has carried out in the past year have raised the costs of mortgages and auto loans as well as credit card interest rates. Inflation has also eroded workers’ paychecks, thereby limiting their ability to spend freely.
For all the challenges facing consumers, they continue to show resilience. Several factors likely helped propel last month’s spending. About 70 million recipients of Social Security and other government pension programs last month received an 8.7% boost in their benefit checks, an annual cost-of-living adjustment to offset inflation. It was the largest such increase in 40 years.
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