US retail sales growth looks much muted when inflation rate is factored in.

US retail sales in January increased by 3% over that in December 2022. On a year-on-year basis, retail sales increased by 6.1% over that in January 2022.  These retail sales numbers include numbers for food services sales too. Total retail sales in the month in USA stood at $ 697 billion. These are advanced estimates from the US Census Bureau. The margin of error is +/- 0.5%.

The biggest contribution to this increase is from restaurants and bars. Sales at restaurants and bars in January 2023 increased month-on-month by 7.2% and year-on-year by 25.2%. The first fortnight of January is part of Christmas holiday season of USA. So the increase is not surprising. The hangover effect of two years of Covid lockdowns and restrictions also has a role to play. There is still a lot of pent-up demand when it comes to cafes, restaurants and bars.

General merchandize stores recorded a month-on-month jump of 3.2% and year-on-year jump of 4.5% in sales. Hobby, musical & bookstores recorded a month-on-month increase of 0.2% and year-on-year increase of 6.9%. The holiday season impact on sales is visible here too.

Electronics & appliance stores recorded month-on-month jump of 3.5% but a - 6.3% on year-on-year basis. This is also because of the high base effect of the corresponding period of the previous year. Sales of Electronics and appliances had increased sharply during Covid restrictions, as people stayed at home.

Auto sales went up month-on-month by 6.4% and year-on-year by 2.5%. 

These numbers have not been adjusted for inflation. This means that a part of the increase was due to inflation rate.  Higher prices can translate into higher sales revenue if not adjusted for inflation. Annual inflation rate in US in January 2023 was 6.4% on year-on-year basis; and 0.5% on month-on-month basis. So if one factors in the inflation rate, the increase in retail sales in January 2023 seems to be much muted. In many sectors, sales in real terms may have gone down in January when adjusted for inflation.