Consumer spending in the United States took an unexpected dip last month, signaling potential strain on American shoppers and adding to concerns about the nation’s economic trajectory.
According to the Commerce Department’s latest report, retail sales in February edged up just 0.2%, a stark contrast to the 0.7% growth that economists had forecasted. This slight increase follows a 1.2% decline in January, which was revised downward. While the figures account for seasonal fluctuations, they do not adjust for inflation.
Economic uncertainty, partly fueled by volatile trade policies, appears to be weighing on consumer confidence. Various consumer sentiment surveys have reflected increasing caution, and now, actual spending data seems to align with that sentiment. Given that retail sales drive approximately one-third of total US consumer spending, these figures are a crucial indicator of economic health.
The data is reinforcing fears that the US economy may be slowing down, potentially setting the stage for a recession. February’s retail sales report did little to alleviate these concerns.
Diverging Spending Patterns: Declines in Stores, Growth Online
A closer look at the numbers reveals significant disparities across retail sectors. Traditional department stores suffered a 1.7% drop in sales, while spending at restaurants and bars fell 1.5%, and gas station sales declined 1%. On the other hand, e-commerce retailers saw a 2.4% increase, and health stores posted a 1.7% rise in sales.
Despite the overall weakness, one segment of the report offered a silver lining. The so-called “control group”—which excludes gas stations, car dealerships, building materials, and restaurant sales—showed a 1% monthly rebound, offsetting its previous 1% decline in January. This was a stronger showing than the 0.4% increase economists had projected.
Still, the data did not inspire confidence. Jonathan Moyes, head of investment research at Wealth Club, noted that while investors were counting on consumer resilience, the weaker-than-expected sales figures suggest “the American consumer may be starting to show signs of fatigue.”
Retailers Sound the Alarm Over Shifting Consumer Behavior
US retailers are increasingly vocal about shifting consumer behaviors, with many warning that inflationary pressures are forcing shoppers to cut back.
Dollar General CEO Todd Vasos recently stated that many customers report worsening financial situations, with some struggling to afford even basic necessities. “A significant portion of our customers tell us they are prioritizing only essential goods,” Vasos noted during the company’s latest earnings call.
Meanwhile, Walmart, the nation’s largest retailer, has forecasted slower sales and profit growth for the year ahead. John David Rainey, Walmart’s Chief Financial Officer, highlighted “uncertainties in consumer behavior, as well as economic and geopolitical risks” as key factors affecting spending trends.
Tariffs Add to Retailers’ Woes
Beyond consumer sentiment, tariffs on imported goods remain a significant challenge for retailers. Best Buy CEO Corie Barry recently pointed out that US tariffs have affected a broad range of products, and vendors are likely to pass additional costs to retailers, which could result in price hikes for consumers.
Similarly, Target CEO Brian Cornell cautioned that new tariffs could “lead to noticeable price increases on fresh produce and household goods within days.” The added uncertainty has made it difficult for companies to plan inventory and pricing strategies.