Grocery store sales mixed for January as U.S. retail sales bounce back

Grocery store sales held relatively steady in January as the overall U.S. retail market rebounded from a two-month decline.

January retail and foodservice sales totaled $696.98 billion (seasonally adjusted), up 3% from $676.93 billion in December and marking a gain of 6.4% from January 2022, the U.S. Census Bureau reported in advance estimates on Wednesday.

Retail trade sales for January—excluding motor vehicles, parts stores, gas stations and repair shops—rose 2.3% month over month to $601.53 billion and were up 3.9% year over year.

January’s retail sales uptick followed sequential decreases of 1.1% in December and 1% in November (in revised Census Bureau figures), though both months saw annual increases of 5.9% and 6%, respectively. Retail trade sales were down 1.3% in December and 1.1% in November on a monthly basis but were up 4.8% and 5.1%, respectively, year over year.

“These numbers defied the predictions of economists, who anticipated a month-over-month increase of only 1.5%, according to a Reuters survey,” Naveen Jaggi, president of retail advisory services at commercial real estate firm Jones Lang LaSalle (JLL), said in an emailed comment. “While these numbers are adjusted for seasonal variation and holiday and trading-day differences, they are not adjusted for price changes or for inflation, which remains elevated at 6.4% above year-ago levels, making the January 2023 numbers even more impressive.”

Grocery store sales inched up 0.1% in January to $72.99 billion (seasonally adjusted) from $72.95 billion in December, when month-to-month results were flat, the Census Bureau said. Year over year, January grocery retail sales climbed 6.6%, compared with an annual uptick of 7.4% for December.

Source: U.S. Census Bureau

Sales at all food and beverage stores in January largely reflected results in grocery, edging up 0.1% month over month to $81.31 billion (seasonally adjusted) and rising 6.2% year over year. December food and beverage store sales had dipped 0.1% sequentially but rose 6.8% on an annual basis, the Census Bureau reported.

“Today’s retail sales report exceeded expectations, showing that despite ongoing inflationary pressure, consumers still have an appetite to spend,” Claire Tassin, retail and e-commerce analyst at data intelligence firm Morning Consult, said in an email. “Morning Consult research also shows that shoppers’ perceptions of inflated prices have softened, particularly in the apparel, home furnishings and personal electronics categories—all of which showed strong month-over-month performance in today’s report. This indicates that many consumers have adapted their expectations to current prices.”

On Wednesday, the National Retail Federation (NRF) reported that January retail sales gained 1.5% month to month (seasonally adjusted) and grew 4.8% (unadjusted) year over year, compared with a 0.5% monthly dip and 4.8% annual increase in December. NRF’s estimate focuses on core retail, excluding automobile dealers, gas stations and restaurants. The retail trade group said its numbers were up 5% unadjusted year over year on a three-month moving average as of January.

Total 2022 retail sales rose 7% to $4.9 trillion, with the November-December holiday sales period closing out the year with a 5.1% year-over-year increase, according to NRF.

“Consumer spending clearly picked up after the holidays. Sales were helped along by job and wage growth, slightly lower inflation and unusually warm and dry weather that preceded February’s record cold,” NRF Chief Economist Jack Kleinhenz said in a statement. “A large cost-of-living adjustment gave Social Security beneficiaries more money to spend, and many consumers were still drawing on savings built up during the pandemic. January made up for the softer pattern of spending in December that came after early shopping pulled holiday spending forward this past fall.”

January sales increased on a monthly basis in all nine retail categories tracked by NRF and declined on an annual basis in just one category—electronics and appliance stores, down 6.5%, NRF said.

Grocery and beverage stores turned in sales growth of 0.1% month to month seasonally adjusted in January and 5.3% unadjusted over 12 months, NRF reported. Among other retail categories in the food, drug and mass channel, January sales rose 1.9% month over month seasonally adjusted and 4.9% unadjusted year over year for health and personal care stores (including drugstores), while general merchandise stores saw sales rise 3.2% month over month seasonally adjusted and 3.4% unadjusted year over year.

Morning Consult's Purchasing Difficulty Index for groceries shows that food pricing has cooled off significantly. / Image courtesy of Morning Consult

“Despite inflationary headwinds, January retail sales show the resiliency of consumers in how they manage their budgets and make decisions on how, when and where to spend their hard-earned dollars,” NRF President and CEO Matthew Shay stated.

January’s retail sales performance indicates that goods categories will show an overall spending boost when the U.S. Bureau of Economic Analysis (BEA) releases personal consumption expenditure (PCE) data later this month, according to Kayla Bruun, economic analyst at Morning Consult. The firm’s January data also reflected an expansion in services purchases, she noted.

“Retail sales had a strong rebound in January after two months of lower spending, rising real incomes and higher savings left consumer finances on a slightly firmer footing to start the year,” Bruun commented. 

Food prices look to continue relaxing, according to Morning Consult. Its Purchasing Difficulty Index for groceries, which measures shoppers’ difficulty finding certain items, has plunged since tracking started in early 2022, potentially indicating the loosening of supply constraints, the research firm said.

“Although resilient consumer spending is a positive sign for the health of the economy, renewed demand for supply-constrained categories could add to inflation pressures, potentially eliciting more aggressive action from the Fed,” noted Bruun.

Indeed, higher prices on consumer packaged goods (CPG)—especially food and beverage—have still sapped consumers’ spending power, according to market research firm The NPD Group.

“Rising prices have been a persistent component of the recent evolution of retail trends, and 2023 is starting off with more of the same,” explained Marshal Cohen, chief retail industry advisor at NPD. “Higher food prices have impeded normal general merchandise behavior, from both a consumer and retailer perspective.”

Across retail, declined consumer purchasing due to elevated pricing has resulted in varying levels of promotional activity to help manage inventories, according to NPD. General merchandise generated largest increase in promotional activity last year, while non-edible CPG promotion held steady and promotions decreased for food and beverages versus 2021.

“Consumers have conditioned themselves to buy what they need when they need it, rather than when they see value,” Cohen stated. “This behavioral shift has made promotions less impactful than in years past.”