MNI REALITY CHECK: Vaccine, Stimulus Fueling ​US Sales Bounce

U.S. retail sales likely rebounded in January after a particularly weak holiday season as improvements in the U.S. Covid vaccine rollout and government relief have boosted spending, industry experts told MNI.

January's sales report from the Commerce Department is likely to be mostly positive, driven mostly by gains in consumer savings, disposable income, and confidence, said Jack Kleinhenz, chief economist at the National Retail Federation. Consumers are "still in good financial shape," he said, and that has encouraged spending.

Kleinhenz said it's likely that less affluent households pulled back on spending in December because relief checks from the USD900 billion stimulus package weren't doled out until the very end of the month, hence the 0.7% decline in sales. But that could translate into more spending power in January, he said.

"Spending could be not only for that income cohort, but I also believe that the other cohorts will probably also have some of the momentum to spend in January," he said.

Spending should pick up by mid-year, he said, even as things like employment growth stall. That's likely to be driven by pent up demand for services, particularly among the wealthy who have opted to save or invest their money until the pandemic is under control and the economy fully opens.

AUTO SALES QUICKEN

New vehicle sales improved again, with January sales reaching a seasonally adjusted annual rate of 16.6 million following December's 16.2 million pace, Charlie Chesbrough, senior economist at Cox Automotive, told MNI. That's the quickest pace since the onset of the Covid-19 pandemic, Chesbrough said, despite January typically being among the slowest months for auto sales, a sign that the new vehicle market is on a sustained "upswing."

Sales this January neared the 16.9 million pace set in January of last year and will likely continue to normalize barring another spike in infections and more restrictions on business and travel, Chesbrough noted.

Likewise, demand for gasoline was largely unchanged in January from December, falling by just 0.13%, Patrick De Haan, head of petroleum analysis at Gasbuddy, told MNI. But that's actually an encouraging sign for gas station sales, he said, as January is normally a weak month following on from holiday travel.

January's smaller-than-expected drop likely stems from improvement in daily Covid case counts, De Haan said, compounded with the gradual state reopenings.

Excluding vehicle sales, retail sales should rise 0.9%, according to Bloomberg, after falling 1.4% in December. Excluding vehicle and gas station sales, retail sales are expected to grow 0.6% following December's 2.1% decline.

APPAREL SALES STATIONARY

Year-over-year declines in footwear purchases likely continued through January, said Gary Raines, chief economist at the Footwear Distributors and Retailers of America, a Washington-based trade association representing more than 90% of the U.S. footwear industry. But those declines have been moderating, and the industry should start to see year-over-year increases in Q2.

Assuming the nation's immunization push is successful, schools and businesses should reopen no later than Q2, creating a "slingshot effect" in apparel sales, he said. But until then, the industry is in a "holding pattern," and consumers aren't likely to buy new clothes when they're being encouraged to stay at home.

"For the time being, with many of us at home, you might be walking around barefoot or in house slippers, but you're not wearing heels to work from home," he said. "Once you begin to see more of a return to school and work, then I think you're going to see that replacement spending kick in for clothing and footwear."

Retail sales are forecast to rise 1% in January, according to Bloomberg, following December's larger-than-expected 0.7% drop.