January sales up 3.8% as consumer spending remains strong

The US Census Bureau released the Advance Monthly Sales Report showing a 3.8% increase in sales compared to December (seasonally adjusted data). Some notable categories that showed significant month-over-month growth were non-store sales up 14.5% (including online shopping), department stores up 9.2%, and Furniture sales remained a strong category in January, up 7.2%.

Sales in January 2022 compared to the same period last year were also strong, indicating a rebound from the pandemic year. Total retail sales increased 12.7% from a year ago, with non-store sales increasing 8.3%. Clothing and accessories, foodservice and department stores saw a significant rebound from January 2021 with sales up 22.3%, 27.9% and 11.5% respectively, as consumers recovered more activities outside the home, including shopping and eating out. Growth in apparel and accessories sales indicates shoppers are turning to fashion items as they begin to increase social activities and travel.

Mastercard SpendPulse indicates consumer spending is strong

According to the Mastercard SpendingPulse, which measures in-store and online retail sales for all payment methods, U.S. retail sales in January were up 7.2%* (minus autos) compared to last year (year-on-year) and online sales increased by 10.4%.

Categories that performed well for the month of January include department stores, apparel and luxury goods which all saw double-digit growth. “Coming right after the holidays, January typically marks a month of returns and exchanges. However, strong growth across all sectors reflects optimism and excitement for the year ahead,” said Steve Sadove, Senior Advisor to Mastercard and former CEO and Chairman of Saks Incorporated. “With almost every sector on the rise, we are seeing consumers return to their shopping habits with a continued focus on digital.”

The Mastercard Spending Pulse showed apparel sales rose 37.6% in January year-over-year, the highest growth rate for January in SpendingPulse history. The clothing sector has seen positive growth for 11 consecutive months as consumers renew their wardrobes and return to social gatherings for 2022. Department stores have made a strong comeback after a difficult year with sales up by 10.5% year-on-year and 9.8% from pre-pandemic levels. Before Valentine’s Day, luxury retail grew 45.3% and jewelry 19.8%. Consumer spending in these areas has been strong despite Omicron concerns, supply chain shortages and high inflation.

Adobe DPI shows inflation continues to rise across all commodity categories

According to the Adobe Digital Price Index (DPI), January prices rose 1.1% from the previous month, marking the 20th consecutive month of online price inflation. DPI measures how much consumers pay for goods online, analyzing a trillion visits to retail sites and over 100 million items across 18 product categories. Year-over-year inflationary pricing increased 2.7% across all categories measured, with 13 of the 18 commodity categories tracked by Adobe Analytics experiencing inflationary pricing.

Prices for clothing and groceries posted notable increases. Clothing saw the fastest price rise, up 15.8% year-on-year. However, this is a slight improvement from December when clothing prices rose 17.3%. Grocery prices rose 5.8% year-on-year, the category’s largest increase on a year-over-year basis. January marks the 24th consecutive month that online prices have increased for groceries, making it the only category that has moved in parallel with the Consumer Price Index, which captures the prices consumers pay in physical stores.

While many categories saw year-over-year price increases, electronics fell 3.4%. Electronics is a strong category for online shopping and uses a dynamic pricing strategy in a highly competitive market which impacts price fluctuations within the category. January prices were up 2.0% from December, which is a very promotional month for electronics. “While price cuts in categories like electronics and apparel (January vs. December) have brought online inflation down slightly from last November’s record high, consumers are still grappling with high prices in the digital economy,” said Patrick Brown, vice president of growth. marketing and information for Adobe.

Year end for most retailers

January marks the end of the fiscal year for many retailers and 2021 was one of the strongest years of growth compared to the pandemic year of 2020. For fiscal 2021, many categories also exceeded levels pre-pandemic sales of 2019.

According to Affinity Solutions, January retail sales, while strong, were mainly driven by the widening income gap. Despite the strong year-on-year increase, spending by low-income groups was significantly lower year-on-year, while spending by high-income people continues to rise. This is a reversal of previous pandemic spending behavior. Additionally, according to Affinity Solutions, the power of Gen Z consumers grows as they increase their market share, a trend that will likely continue as they enter the workforce and start earning their own money.

2021 has been a year of solid growth coming out of the pandemic

Across numerous metrics such as in-store sales, digital commerce and consumer spending data, fiscal 2021 ended with exceptionally strong performance despite supply chain issues, strong demand with limited supply, the Omicron COVID variant, worker shortages and month on month rising inflation throughout the year. It was a good end to a remarkable year filled with challenges and continuous changes in consumer spending.