U.S. retail sales showed a slight recovery in February, indicating cautious consumer behavior amidst economic uncertainties, including tariffs and widespread layoffs within the federal workforce. The Commerce Department’s report highlights that while retail sales grew by 0.2% in February, this follows a revised downturn of 1.2% in January. Economists had anticipated a stronger rebound of 0.6%, but the figures face headwinds from previous strong gains in the fourth quarter and adverse weather conditions earlier in the year. Year-over-year, sales rose by 3.1% in February, buoyed largely by a significant 2.4% increase in online shopping.
Health and personal care store sales also climbed by 1.7%. In contrast, auto dealerships experienced a 0.4% decline in receipts following a 3.7% drop in January. Sales in clothing and electronic retail stores decreased by 0.6% and 0.3%, respectively. The only service category in the report saw a 1.5% drop, impacting food services and drinking establishments, which are viewed as a crucial barometer of consumer financial health.
With consumer sentiment at a near 2.5-year low in March, a bleak outlook for sales is likely. President Trump’s tariffs are raising concerns about inflation and income loss, potentially dampening consumer expenditure. Retailers including Kohl’s and Walmart have adjusted their sales forecasts downwards amidst inflation worries. Recent data from Bank of America indicates weakening discretionary spending, particularly at restaurants in the Washington D.C. area.
Treasury Secretary Scott Bessent noted the possibility of a slowing economy as it shifts from public to private expenditure, with no assurances against a recession. As the Federal Reserve prepares to assess the economic landscape, core retail sales, excluding cars and fuel, increased only 1.0% in February, hinting at a potential slowdown in consumer spending projected for the first quarter.