• Retail sales rose 5.3% in January from December, the biggest increase since June 2020; they are now 8% above their pre-pandemic level. 

• Sales were strong across all segments as stimulus payments boosted consumer spending. 

• Consumer spending, supported by stimulus, will drive economic recovery in 2021.

Retail sales rose 5.3% in January from December, following a 1.0% decline the previous month (revised from a 0.7% decline). This was the first increase in retail sales since September, and the largest increase in sales since June. Retail sales excluding autos were up 5.9% over the month, and sales excluding autos and gasoline were up 6.1%. Control sales—retail sales excluding food service, autos, gasoline, and building materials, and which go into consumer spending in GDP—were up 6.1% in January. 

Sales growth was strong across the board in January. There were especially large gains for department stores (+24%), electronics and appliances stores (+15%), furniture and home furnishings stores (+12%), and nonstore retailers (primarily online sales, up 11%). Restaurant and bar sales rose 7% over the month, after declines in the three previous months amid rising coronavirus cases. While most categories of retail sales are above their pre-recession peak, restaurant and bar sales in January were still remain 16% below their February 2020 level as many people remain reluctant to dine out. 

Stimulus payments to many households in January supported retail sales gains over the month. Retail sales have been on a roller coaster ride over the past year: they plunged 22% in March and April combined as the pandemic hit, rose to above their pre-recession level over the summer as consumers ventured out again and spent their stimulus payments and unemployment insurance benefits, and then fell again in late 2020 as coronavirus cases moved back higher. Sales in January were at an all-time high, up 8% from before the pandemic. Spending growth should remain strong in the near term as coronavirus cases have declined recently, vaccine distribution is picking up, and households still have stimulus funds to spend. Consumer spending growth will drive economic recovery throughout 2021 and into 2022.

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