Retail sales unexpectedly surge in January

Pay raises, solid hiring, and enhanced savings helped retail sales jump by 3.8 percent from December to January, the Commerce Department said on Wednesday. That was a much bigger increase than economists expected. General merchandise store sales rose 3.6 percent, and department store sales jumped 9.2 percent. Online sales also soared 14.5 percent. Only restaurants suffered a drop of 0.9 percent.

What does this mean? Though inflation helped boost that figure, most of January’s gain reflected more purchases, not higher prices. Last month’s increase was the largest in nearly a year. Robust spending is good news for the economy, but analysts caution it could also further accelerate inflation. Even though consumers are concerned about inflation, high spending rates indicate they are still confident that job opportunities and higher wages will keep pace. As COVID-19 cases decline, Americans are expected to start spending more on experiences like concerts and movies rather than goods.

Dig deeper: Listen to Joshua Schumacher’s report on consumer spending during the holidays on The World and Everything in It podcast.