Washington —
Americans stepped up their spending at US retailers in February, after three consecutive months of declines, showing the US consumer hasn’t tapped out yet in the face of weak job growth and low consumer sentiment.
Retail sales rose 0.6% in February from the prior month, the Commerce Department said Wednesday, up from January’s downwardly revised -0.1%. Wednesday’s figure was higher than the 0.4% increase economists projected in a poll by data firm FactSet.
Retail sales are adjusted for seasonal swings but not inflation. The February retail sales report was delayed a few weeks because of last year’s government shutdown.
Retail sales climbed across nearly every category in February, declining only at grocery stores and furniture retailers, each decreasing 1%. Meanwhile, retail spending increased the most at department stores (3%), personal care shops (2.3%) and clothing retailers (2%).
A measure of retail sales that strips out volatile categories — such as building materials, cars and gasoline — rose 0.45% in February, higher than expectations of a 0.3% increase. That figure, known as the “control group,” is a closely watched indicator of underlying demand in the economy.
Economists watch spending data closely because Americans’ purchases make up about two-thirds of the US economy. In recent years, spending has been more closely tied with the health of US labor market — specifically layoffs — rather than people’s attitudes toward the economy.
While job growth has been tepid over the past year, layoffs haven’t risen more than usual, meaning Americans are still able to power the economy with their spending. New applications for unemployment benefits remain at historically low levels.
The Bureau of Labor Statistics on Friday is set to release the monthly jobs report, including job growth, wage gains and the unemployment rate for March. In the beginning of the year, investors and economists broadly estimated that the labor market would remain stable this year, albeit in a weaker state.
The US-Israeli war with Iran is now in its fifth week. As a result, the Strait of Hormuz, a major global chokepoint, has been closed off for weeks. One-fifth of the world’s oil passes through the key waterway, in addition to various other commodities.
“The February retail sales report predates the recent escalation of conflict in the Middle East,” Vivian Chen, financial market economist at Nationwide, said in a release. “It does not yet reflect any potential drag from higher energy prices, financial-market volatility, or heightened geopolitical uncertainty.”
The war threatens to both jack up inflation and weaken economic growth, with that risk growing the longer the Middle East conflict persists. President Donald Trump said the war could be done within two to three weeks, and is set to deliver an address to the nation Wednesday evening.
Trump has floated ending the war without re-opening the Strait of Hormuz, which would do little to fix the global energy crisis, experts have told CNN. Earlier this week, WTI, the US benchmark, settled at $102.88, its highest closing level since July 2022. The war’s end would likely prompt oil prices to immediately tumble, but without reopening the strait, experts say oil prices may remain elevated for longer.
On Tuesday, the average price for a gallon of gasoline crossed $4 for the first time since 2022. The prices of plastic and fertilizer have also climbed recently.
As the war drags on, Americans are growing pessimistic about the economy, according to some surveys and polls. According to a new CNN poll conducted by SSRS, released Wednesday, roughly two-thirds of Americans say Trump’s policies have worsened economic conditions in the US, up 10 points since January.
The University of Michigan’s latest consumer survey showed that consumer sentiment declined 6% this month to its lowest point since December, with sentiment souring across all income groups — including the wealthiest.
“Declines were seen across age and political party,” Joanne Hsu, the survey’s director, said in a release.
