Americans' spending rebounded to record highs in January as strong demand overpowered the Omicron wave's peak

• US retail sales surged 3.8% to record highs in January as the Omicron wave peaked.
• Economists expected sales to rise 2% last month after dropping 2.5% in December.

Retail sales rebounded through January as the Omicron wave hit its peak and inflation turned even hotter.

Spending at US retailers and restaurants rose 3.8% last month to a record $649.8 billion, the Census Bureau said Wednesday. Economists surveyed by Bloomberg expected sales to jump 2%. The print reveals spending sharply accelerated in the first weeks of 2022 after diving 2.5% the month prior.

December's total was revised to $626.3 billion from $626.8 billion, according to the report.

Spending soared the most for nonstore retailers like Amazon, with the sector enjoying a 14.5% leap in sales. Department stores followed with a 9.2% gain. Furniture stores and vehicle dealers saw 7.2% and 5.9% increases, respectively.

Sales fell the most for sporting goods, hobby, musical instrument, and book stores, as the sector saw a 3% decline through January. Gas stations saw sales contract 1.3% as gasoline prices edged slightly lower through the month. Sales fell slightly for restaurants and bars as well.

The Wednesday report signals demand held strong despite the Omicron wave hitting its peak. Daily virus infections hit a record 1.43 million on January 10 as holiday travel boosted the variant's spread. Case counts have fallen sharply since, but they remained elevated through the end of last month. The data suggests the virus is playing a diminished role in keeping Americans from their pre-crisis shopping habits.

The data also hints at high inflation doing little to curb spending. Prices soared 7.5% year-over-year in January, according to government data published Thursday. That marked the fastest inflation since February 1982, and the month-over-month gain matched December's 0.6% rate.

The retail sales data joins other indicators suggesting inflation will stay elevated well into 2022 as demand continues to outstrip supply. The Producer Price Index – a popular measure of businesses' costs – rose 1% through January, doubling the forecast for a 0.5% gain and marking the largest increase since July. The measure is a closely watched forward indicator for inflation, as higher input costs have historically forced businesses to raise prices. With PPI climbing faster than anticipated, it's increasingly unlikely inflation cools off soon.