U.S. retail sales surged in January as households received income support checks

*U.S. retail sales surged by 5.3% m/m in January, one of its largest monthly increases on record, following three months of declines, lifting it to an all-time high and 7.8% above its pre-pandemic level (Chart 1). January’s sales were boosted by the government’s $600 income support checks to households and enhanced unemployment compensation, and the easing of the pandemic. We expect sales to continue to increase in the coming months as vaccines are more widely administered, state and local governments loosen restrictions, households receive additional income support checks from the government, and the pandemic ebbs. Today’s data support our above-consensus forecast of 6.5% real GDP growth in 2021 (Already strong U.S. economic growth outlook revised up further, January 29, 2021).

*Remarkably, all sales categories increased in January and nine out of 13 are above their pre-pandemic levels (Table 1 and Chart 2). Sales at nonstore retailers (+$8.7bn), motor vehicle & parts dealers (+$3.6bn), restaurants and bars (+$3.5bn), and general merchandise (+$3.3bn) stores contributed the most to overall sales growth (+$28.5bn). Control retail sales (excludes gasoline stations, food services and drinking places, building materials, and auto sales), which factor directly into GDP, jumped by 6.0% m/m, its first increase since September, placing it on track to increase by 15.9% q/q annualized in Q1 following its 2.4% annualized decline in Q4 (Chart 3).

*The strong increase in January’s retail sales sets a high baseline for consumption (scheduled for release on February 26). Although retail sales has long exceeded its pre-pandemic level, consumption is still 2.6% below because it includes a broader range of services. Once conditions begin to normalize this year, we expect the release of pent-up demand and the massive cumulative excess household savings (estimated to be $1.5tn through December) to boost services consumption.

Nonstore retail sales (includes online) jumped by 11% m/m to an all-time high in January after its surprising 7.4% decline in December, placing it 27.5% above its pre-pandemic level, making it the best performing category, by far, throughout the pandemic (Chart 4 and Table 1). Nonstore sales now account for 15% of overall retail sales, up from 13% in February 2020.

Sales at restaurants and bars increased by 6.9% m/m in January, placing it 16.4% below its pre-pandemic level, and sales at grocery and liquor stores increased by 2.4% m/m, placing it 12% above its pre-pandemic level (Chart 5). Before the pandemic, restaurant and bar sales exceeded grocery and liquor store sales by $1bn, but they are now $17.4bn below. This gap will narrow as conditions normalize.

Sales at housing-related retailers surged in January. Sales at electronics and appliance stores, and furniture and home furnishing stores increased by 14.7% m/m and 12.0% m/m, respectively (Chart 6). They should continue to be boosted by the strong growth in home sales. Sales at building materials, garden equipment & supply dealers increased by 4.6% m/m, lifting it 20.2% above its pre-pandemic level (Chart 7). This category has benefited from the shift to work-from-home, which has led many households to do home improvement projects.

We emphasize that high frequency data pointed to this strong increase in retail sales (Real-time insights, economic and financial pulse, February 16, 2021). Credit and debit card spending jumped in early January, after the $600 income support checks were disbursed to households, exceeding its pre-pandemic baseline. Mobility data reflect increased activity at retail and recreational spaces thus far in February, suggesting that this solid consumer momentum should continue.

Table 1: Retail sales trends since February 2020

Sources: Census Bureau and Berenberg Capital Markets

Chart 1:

Chart 2:

Sources: Census Bureau and Berenberg Capital Markets

Chart 3:

Chart 4:

Chart 5:

Chart 6:

Chart 7:

Roiana Reid, [email protected]

Member FINRA & SIPC
This email and any files or attachments transmitted with it may contain confidential or privileged information and are intended solely for the use of the intended recipient. If you are not the intended recipient, please do not copy, retain, disclose or use any part of the message or its attachments. Please notify the sender immediately by return email and destroy or delete any copies. Dissemination or use of this information by anyone other than the intended recipient is unauthorized and may be illegal. Communications by email cannot be guaranteed to be secure or error-free. Emails and their attachments are subject to being intercepted, becoming corrupted, getting lost or delayed, or may contain viruses. Therefore, neither the sender nor Berenberg Capital Markets LLC (BCM) accepts any liability for any errors or omissions in the content of this message or problems in its transmission, including those arising as a result of its transmission over the internet.
BCM does not assume liability for the correctness and completeness of all information given and/or attachments contained herein. The provided information has not been checked by a third party, especially an independent auditing firm. BCM explicitly points to the stated date of preparation. The information given can become incorrect due to passage of time and/or as a result of legal, political, economic or other changes. BCM does not assume responsibility to indicate such changes and/or to publish an updated document. Any document(s) or attachment(s) is meant exclusively for institutional investors and market professionals, but not for private customers. It is not for distribution to or the use of private investors or private customers.
In light of upcoming regulatory changes, please be informed that BCM will continue to share information with you until [email protected] receives your termination/deletion request. For more information about the General Data Protection Regulation (GDPR) and our privacy policies please refer to https://www.berenberg-us.com/legal-notice. BCM reserves all the rights in this communication. No part of this communication or its content may be rewritten, copied, photocopied or duplicated in any form by any means or redistributed without BCM’s prior written consent.
The information contained herein and sourced may have been adopted from various news sources, for example, Bloomberg, Reuters, Street Account and various other sources. BCM does not claim accuracy, completeness, timeliness, suitability, or otherwise regarding all the information on the securities, stock markets, or developments referred to within. On no account should the Content be regarded as a substitute for the recipient procuring information for himself/herself or exercising his/her own judgments. BCM is not responsible for any recipient(s) use of this information. This Content is not a solicitation or an offer to buy or sell any of the securities contained herein. This information does not constitute a recommendation or take into account the particular investment objectives, financial situations, or needs of clients. Clients should consider whether any advice or recommendation in this Content is suitable for their particular circumstances and, if appropriate, seek professional advice, including tax advice. The price and value of securities which may be referred to in this Content and the income from them may fluctuate. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. Fluctuations in exchange rates could have adverse effects on the value or price of, or income derived from, certain securities.