Prices keeping rising but Americans keep buying. It's a promising sign for the economy.

• Retail sales trounced estimates in January despite inflation hitting a four-decade high.
• The sales report is a "game-changer" that will likely lift estimates for Q1 growth, Wells Fargo said.

Inflation has Americans feeling the worst about the economy in a decade. That's not been enough to curb their pandemic-era shopping spree.

Data published Wednesday morning showed Americans pushing through high inflation and spending big in the first weeks of 2022. Retail sales soared 3.8% to a record $649.8 billion through January, according to the Census Bureau. That beat the median forecast of a 2% jump and reflected a sharp rebound from December's 2.5% drop. January spending was also the strongest since stimulus payments were rolled out in March 2021.

The report signals the two biggest obstacles for the economic recovery — virus cases and inflation — aren't doing much to slow the rebound. Last month represented the peak of the Omicron variant's spread, with the country adding a record 1.43 million new cases on January 10. Inflation also surged to fresh highs, hitting a year-over-year pace of 7.5% as businesses continued to hike prices. That's the fastest rate since February 1982.

Despite those twin headwinds, Americans' spending kept barreling through. That's a great sign for the broader economic recovery, Wells Fargo economists Tim Quinlan and Shannon Seery said in a Wednesday note.

Higher prices counted for some of the increase, since sales data are reported in nominal dollars. But accounting for that effect still suggests real sales rose a "whopping" 2.95% through the month, the team said.

"Without this January bounce, first-quarter consumer spending was on track to come in very soft or even post a modest decline," the economists added. "This better-than-expected report is a game-changer and will likely result in some upward revisions to first-quarter growth rates."

That's a significant shift from outlooks shared just weeks ago. Several analysts called for weak GDP growth in the first quarter after the bulk of fourth-quarter growth came from a boost to inventories. The lack of such a boon in the first quarter, they argued, would leave little to fuel a strong expansion.

Some even forecasted negative growth through the first three months of 2022, contending high inflation and mediocre performance in February and March would freeze the recovery. The Wednesday sales report throws a wrench in such gloomy projections and instead hints at an unexpectedly strong expansion through January.

The data also mitigates concerns that Americans' dwindling economic hopes would lead to a drop in spending. Consumer sentiment plunged to the lowest level since October 2011 in an early February survey, according to the University of Michigan. Respondents bemoaned skyrocketing prices, tumbling stocks, and a lack of confidence in the government's economic policies for their soured moods. But while shoppers might be feeling down, they're shopping nonetheless.

That resilience could be key to keeping the recovery afloat. January's blowout sales figure suggests consumer spending isn't cooling anytime soon. Overwhelming demand helped drive inflation higher last year. The onset of the global supply-chain crisis worsened the problem, leaving businesses struggling to match shoppers' massive spending with strained inventories.

The US is likely past the peak of the supply-chain mess, but signs point to inflation still holding strong well into 2022. The Producer Price Index — a closely watched measure of businesses' input costs — rose 1% in January, doubling the 0.5% forecast. The measure is a popular forward indicator for inflation, as soaring business costs typically lead to higher prices for consumers.

Prices, then, are poised to keep climbing. The latest retail sales data show Americans pushing through historic inflation and keeping the recovery strong, even if they aren't feeling great about it.