- Strongest reading since March 2021
- Prior was -1.1%
- Ex autos +2.3% vs +0.8% expected
- Prior ex autos -1.1%
- Control group +1.7% vs +0.8% expected
- Prior control group -0.7%
- Ex autos and gas +2.6% vs -0.7% prior
- Gasoline stations +5.7% m/m
- Electronics and appliance stores +3.5% vs -1.1% m/m prior
- Furniture stores +4.4% vs -2.5% m/m prior
- Restaurants +7.2% vs +0.0% m/m prior
The December reading was surprisingly bad but great weather in January had many leading towards a beat, with Bank of America leading the way in forecasting +2.6% in the control group. The US dollar is higher on the headlines but perhaps not as high as some would have expected given the sizzling number. Some market watchers (including us) sniffed out that the report would be strong so the real expectation might have been higher than the 'consensus'. There are also some one-time and seasonal adjustments in this report that added to the upside, including a large increase to the cost-of-living allowance for Social Security recipients.
Still, the Fed is going to look at this and price in some measure of pipeline inflation. I suspect that short-term USD-bids are being trimmed on the 'sell the fact' trade, but they could circle back later.
I find the year-over-year numbers offer a good indication on where the strength in the economy is coming from and that 25.2% jump in food services & drinking places (restaurants) pops off the page in the pandemic recovery. Note that these are nominal sales so you need to deduct inflation, which matches the 6.4% rise in y/y sales in January.
