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Retail Sales Rose Strongly on Stimulus in January

Shoppers are spending their stimulus checks.
(George Rudy)
(George Rudy)
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Retails spending improved by 5.3% in January, which snapped a trend of sliding numbers for the past three months, WSJ reports.

Why It Matters: The bump is largely attributed to the most recent stimulus payments American received in the $900 billion Covid-19 relief package. Distributed in early January, the $600-a-person checks were “projected to be the main factor driving an uptick in spending,” and proved to be so.

More On That:

  1. “Grocery, big-box and electronic stores likely benefited in January as households stocked up on essential goods with their stimulus payments.”
  2. Sarah Wyeth, a retail analyst at S&P Global Ratings said consumers “continue to spend on things that improve their life at home, this nesting dynamic.”
  3. Multi-category retailers such as Walmart, Target and Costco play a significant role with consumers consolidating shopping trips.

But Hold On One Second:

  1. Wyeth still advised caution. Between the labor market weakness, a recent decline in consumer sentiment, and the tricky rollout of Covid-19 vaccines, it’s hard to put a ton of faith in the strength of January’s numbers.
  2. Vaccine distribution issues coupled with new variants of Covid have diminished “business leaders’ hopes for getting back to normal quickly.”
  3. Last week, Coca-Cola said the pandemic this winter had been worse than expected, creating challenges for the beverage giant in the first six months of 2021.

Still, some companies saw rewards amid the heightened spending. Hasbro and Mattel said last week “they enjoyed a boost during the Covid-19 pandemic as lockdowns spurred parents to spend on toys from board games to Barbie dolls for their children.”

Justin Oh:

Stimulus, baby. Additional stimulus drives economic spending and profits, which should keep this party going. The only question is what the aggressive debasement of the US Dollar will do to the structure of our economy.

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