What’s going on here?
US retail sales nudged up by 0.2% in February, suggesting a bit of strength after a 1.2% decrease the previous month. Sales hit the brakes at gas stations and mostly stalled in the auto industry, but core retail segments (excluding these volatile sectors) grew by 1%.
What does this mean?
February’s modest retail sales uptick at least hinted at some underlying resilience in specific consumer sectors, as long as you excluded the more erratic components like gas and autos. After all, the so-called control group – a key measure of core retail activity – increased by a hefty 1%. Still, the broader outlook for consumer spending wasn’t nearly as upbeat: estimates project just a 0.7% annualized growth rate for the first quarter, down sharply from the previous quarter’s 4.2% tally. And that expected slip isn’t completely out of the blue: potential tariffs are expected to drive up consumer prices, intensifying the spending squeeze.
Why should I care?
For markets: Cautious consumerism.
The moderate rise in retail sales reflects mixed signals in the market. As gas prices drop and the automotive sector flounders, investors could shift their affections to the stronger-looking core retail segments. But they might want to step lightly: potential tariff impacts and consumer price rises will likely influence how often folks splash out on nice-to-have items.
The bigger picture: Not-so-confident consumers.
Consumer spending is facing some real challenges – the latest University of Michigan consumer confidence survey this month confirmed as much. And that can hardly come as a surprise: steep new taxes on imported goods are threatening to make everything more expensive for households and businesses. Luckily, household finances still look solid, even after the recent stock market dip, and so far, layoffs haven’t been picking up. So spending may simply downshift this year, rather than grinding to a complete halt, but it’ll be worth watching for signs of trouble in the household sector.
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Originally Posted March 19, 2025 – US Retail Sales Hinted At Strength Back In February
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