Implications: Could the Plow Horse economy be starting to trot? Retail sales started off 2017 at a healthy pace, and we hope the Federal Reserve is paying attention. Sales rose 0.4% on the back of an upwardly revised 1.0% gain in December, coming in much higher than the consensus expected. Overall retail sales are now up 5.6% in the past year, the best reading since March 2012, and we expect that trend to stick. Sales are up at a 6.3% annual rate in the past six months and a 6.0% rate in the past three months. What was most impressive is the gain in January came even though auto sales declined 1.4%. Excluding autos, retail sales rose 0.8% and are up 5.3% in the past year, also the best year-to-year reading since March 2012. The gain in sales in January was broad-based with nine of thirteen major categories showing growth. Although gas station sales rose the most due to higher fuel prices, "core" sales, which exclude autos, building materials, and gas, rose 0.6% in January, the sixth consecutive monthly gain and the 11th gain in the past 12 months. Core sales are now up 4.3% from a year ago and we expect that trend to accelerate in the year ahead. Job growth continues, nominal wages gains are accelerating, and consumer debt service obligations are very low by historical standards.
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