NEW YORK (AP) – Fueled by pay gains, solid hiring and enhanced savings, Americans sharply ramped up their spending at retail stores last month in a sign that many consumers remain unfazed by rising inflation.
Retail sales jumped 3.8% from December to January, the Commerce Department said Wednesday, a much bigger increase than economists had expected. Though inflation helped boost that figure, most of January’s gain reflected more purchases, not higher prices.
Last month’s increase was the largest since last March, when most households received a final federal stimulus check of $1,400. The fact that consumer spending remains brisk even after government stimulus has faded – enhanced unemployment aid ended in September – suggests that Americans’ pay is rising enough to drive a healthy pace of spending and economic growth.
Still, those trends could also further accelerate high inflation, which has become the biggest threat to the economy and the reason the Federal Reserve is expected to raise interest rates several times this year beginning in March.
“Consumers say they are worried about inflation, but they continue to spend,” said Gus Faucher, chief economist at PNC Financial. “Job growth is strong, wages are increasing and household wealth is way up thanks to rapidly rising home values and, until recently, stock prices.”