Topline
U.S. retail sales surged 4.8% year-over-year in January, rising to $668 billion, setting the stage for unexpectedly strong retail growth in 2025, according to data just released by the U.S. Census Bureau.
People Carry shopping bangs along the 5th avenue during the 200th years anniversary celebration in ... [+]
Key Facts
Auto vehicle and parts dealers, which is the largest category in retail, led the charge, up 6.8% year-over-year to $126 billion on a reported, not a seasonally-adjusted basis.
Surprisingly, nonstore retailers, the second largest retail category that typically posts the fastest growth, only advanced 3.8% to $121 billion, meaning more shoppers actually went to the store in January.
Besides shopping, consumers also spent more time in restaurants and bars, with food services posting the second fastest growth, up 6.9% to $91 billion.
General merchandise stores, think Walmart, Costco and Target, got a strong 5.2% boost to $70 billion. Even languishing department stores, which report under the general merchandise segment, posted a 1.4% uptick, to $9 billion.
Americans started to decorate their homes once again, with furniture and home furnishings stores advancing 5.2% year-over-year to $10.5 billion, though they haven’t yet started home renovation projects with the building materials retail segment only up 0.7% to $33 billion.
Food and beverage stores got a 5% boost to $84 billion and health and personal care stores were up 4.6% to $38 billion.
Clothing and fashion accessories stores rose 3.6% to $20 billion with shoppers finding a lot of post-holiday bargains for the picking.
Only sporting goods, hobby, musical instrument and book stores declined, down 4.3% to $6.8 billion.
Rounding out the list were gasoline stations up 2.4% to $48 billion, miscellaneous retailers, including office supply, stationery and gift stores, up 6.6% to $14 billion and electronics and appliance stores basically flat at $7 billion.
Background
The National Retail Federation came out this morning with a subdued headline, “Census Data Shows Slower Retail Sales in January,” as it focused on the month-over-month seasonally-adjusted decline of 0.9% from December in “core retail sales,” which excludes automobile and parts dealers, gasoline stations and food service. However, a December-to-January decline in retail sales is to be fully expected. And by excluding automobiles, gasoline and food services from its analysis, the NRF is ignoring retail’s largest segment, i.e. autos, and gas purchases to power consumers’ car trips. The NRF also overlooks food services which is an important contributor to retail spending, as well as a competitor to how consumers choose to spend their time, either shopping for more stuff or enjoying real-life dining experiences. A year-over-year analysis across the entire retail and food services industry provides a much more revealing look at the Census data and what it says about the state of the consumer economy.
Comparing Apples-To-Apples
Retail and food services ended last year with healthy 3% growth, rising to $8.5 trillion, but it got off to a slow start, advancing only 2% in January 2024 year-over-year. Further seven of retail’s reporting segments were down last January, specifically furniture and home furnishing stores, electronics and appliance, building materials, gasoline stations, department stores, sporting goods and miscellaneous stores. Therefore, these segments are going against weak comps from last year.
Demand For More Real-Life Experiences
Looking back to January 2024, nonstore retailers rose 8.2% that month, so its more modest 3.8% growth this January is a significant dial-back to its previous fast growth pace. However, food services and drinking places grew 5.9% last January and added another 6.9% on top of that this year, showing how Americans are going for more IRL experiences.
Car Buying In Overdrive
A sign of rising consumer confidence is the increased investment in automobiles this January. Car dealers, which report under the motor vehicle and parts dealers segment, advanced 7.3% in January as compared with only a 0.6% uptick in January last year. Automotive dealers ended 2024 up 2.4%, showing just how strong demand was for cars starting the year.
Contra
With the Trump administration bringing on a range of tariffs that could significantly boost the already inflated prices for consumer goods, consumers may have got the jump on tariffs by shopping more in January. The NRF has warned about consumers’ reduced spending power and disruption to retail supply chains in the face of the President’s planned reciprocal tariffs.
Crucial Quote
“The numbers for January are very encouraging. This offers a boost to retailers’ confidence in consumer spending after a slightly better-than-expected holiday season. There is still a question about upcoming retailer quarterly results as to whether a lot of those sales occurred because retailers were clearing out a bunch of Christmas inventory. However, these numbers show promise for positive positioning as the industry heads into the otherwise unknown territory of tariff impacts and other factors,” Nikki Baird, vice president of strategy and product at Aptos, shared with me.
Further Reading
NRF Responds to Reciprocal Tariffs ( NRF press release, 2/13/2025)
Advance Monthly Retail Sales for Retail and Food Services, January 2024 (Census Dept. report, 2/14/2025)
Census Data Shows Slower Retail Sales in January, but the Economy Is Still Expanding (NRF press release, 2/14/2025)
