January Sales Up 3.8% As Consumer Spending Remains Strong

The U.S. Census Bureau released the Advanced Monthly Sales Report showing a 3.8% increase in sales compared to December (seasonally adjusted). Some notable categories that showed significant growth month over month 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 were up 12.7% compared to last year with non-store sales up 8.3%. Apparel and accessories, food services and department stores showed a significant bounce back from January 2021 with sales up 22.3%, 27.9% and 11.5% respectively, as consumers resumed more activities outside the home including shopping and dining. The growth in apparel and accessories sales indicates shoppers are looking 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 across all forms of payment, January U.S. retail sales were up 7.2%* (minus autos) compared to last year (YoY) and online sales grew 10.4%.  

Categories that performed well for the month of January include department stores, apparel and luxury goods which all experienced double-digit growth. “Coming on the heels of the holidays, January typically marks a month of returns and exchanges. However, the strong growth across sectors reflects the optimism and eagerness for the year ahead,” said Steve Sadove, senior advisor for Mastercard and former CEO and Chairman of Saks Incorporated. “With nearly all sectors up, we see consumers returning to their shopping habits with a continued emphasis on digital.”

The Mastercard Spending Pulse showed apparel sales up 37.6% in January YoY, the strongest growth rate for January in SpendingPulse history. The apparel sector has experienced positive growth for 11 consecutive months as consumers refresh wardrobes and return to social gatherings for 2022. Department stores made a strong comeback from a difficult year with sales up 10.5% YoY and 9.8% compared to pre-pandemic levels. Leading into Valentine’s day, luxury retail was up 45.3% and jewelry up 19.8%. Consumer spending in these areas was strong despite Omicron concerns, supply chain shortages and elevated inflation. 

Adobe DPI shows inflation continues to grow across merchandise categories

According to the Adobe Digital Price Index (DPI), January prices were elevated by 1.1% compared to the previous month, which marks the 20th consecutive month of online price inflation. The DPI measures how much consumers pay for goods online, analyzing one trillion visits to retail sites and over 100 million items across 18 product categories. Year-over-year inflationary pricing was up 2.7% for all categories measured with 13 of the 18 merchandise categories tracked by Adobe Analytics experiencing inflationary pricing. 

Apparel and grocery prices showed notable increases. Apparel experienced the most rapidly rising prices, up 15.8% YoY. However, this was a slight improvement from December where apparel prices rose 17.3%. Grocery prices were up 5.8% YoY, the highest increase for the category on an annual basis. January marks the 24th consecutive month where online prices have risen for groceries, making it the only category that has moved in lockstep with the Consumer Price Index, which captures prices consumers pay in physical stores.

 While many categories experienced higher YoY pricing, electronics dropped 3.4%. Electronics is a strong category for online purchasing and uses a dynamic pricing strategy in a highly competitive market which impacts the pricing fluctuations in the category. January prices were up 2.0% compared to December, which is a highly promotional month for electronics. “While price drops in categories like electronics and apparel (January compared to December) have brought online inflation down slightly from the record high last November, consumers are still contending with elevated prices in the digital economy,” said Patrick Brown, vice president of growth marketing and insights for Adobe. 

Fiscal year end for most retailers

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

According to Affinity Solutions, January’s retail sales, while strong, were driven primarily by the widening income divide. Despite the strong annual increase, spending among lower income groups was significantly lower YoY, whereas spending among higher income individuals continues to rise. This is a reversal of earlier pandemic spending behavior. Also, according to Affinity Solutions, the power of Gen Z consumers is growing as they increase their market share, a trend that will likely continue as they enter the labor market and begin to earn their own money.

2021 was a solid growth year coming out of the pandemic

Across many metrics such as store sales, digital commerce and consumer spending data, fiscal year 2021 ended with an exceptionally strong performance despite the supply chain issues, high demand with limited supply, the Omicron COVID variant, worker shortages, and month-over-month rising inflation throughout the year. It was a good ending to a remarkable year filled with challenges and ongoing consumer spending shifts.