The fourth successive monthly increase in retail sales was one of the most positive developments the U.S. economy has experienced in recent times. Powered by an improving job market, wage growth and low gasoline prices, retail sales increased more than estimated in January. Further, the decline reported for December was revised to an increase.

Such data indicates that U.S. consumers are deriving confidence from strong economic fundamentals. They seem to be unperturbed by the turmoil the markets are going through. This is why it makes good sense to pick up select retail stocks at this time.     

Successive Monthly Increases

Retail sales gained 0.2% in January, keeping up with the increase recorded for the month of December. This was also higher than the consensus estimate of a 0.1% increase. Initially estimated to decline by 0.1%, retail sales for December were revised upward to a 0.2% increase according to fresh estimates. After excluding the impact of low gasoline prices, the metric increased by 0.4%.

Of the 13 broad categories, 8 experienced an upswing in demand over the month of January. Online purchases increased 1.6%, recording the strongest gain in 11 months. Grocery store sales increased 0.8% while motor vehicle and parts dealers experienced a 0.6% gain. Gardening equipment and building material supplies dealers experienced a 0.6% increase. 

Multiple Factors Fueling Gains

A resurgent labor market and strong wage gains were a major factor fueling purchases. Even though the U.S. economy added only 151,000 jobs in January, missing the consensus estimate of 195,000, there were gains on other fronts. The unemployment rate declined from 5% in December to 4.9% in January, the lowest level witnessed since 2008.

But more importantly, average hourly earnings gained nearly 0.5% in January from the previous month’s figure to $25.39, higher than the consensus estimate of a 0.3% rise. Average hourly earnings witnessed a 2.5% rise from the year-ago figure.