Retail Sales Slump Raises Concerns Over Consumer Spending, Economic Growth

US retail sales experienced a weaker-than-anticipated increase in February, coupled with a downward revision of January’s figures, fueling concerns about a potential slowdown in consumer spending and broader economic growth, as per Bloomberg.

Data released by the Commerce Department on Monday revealed a 0.2% rise in retail purchases, unadjusted for inflation. This figure fell short of economists’ expectations. Furthermore, January’s data was significantly revised down to a 1.2% decline, marking the largest drop since July 2021.

The report, largely focused on goods spending, is particularly significant in light of President Donald Trump’s tariffs on imports from major trading partners, which are expected to drive up consumer prices. Economists have already begun to revise down economic growth estimates in recent weeks.

Of the 13 categories tracked in the report, seven experienced decreases. Notably, motor vehicle sales, which were anticipated to rebound after a weak January, declined. Sales of gasoline, electronics, and apparel also saw a decrease. Spending at restaurants and bars, the only service-sector category included in the report, fell by the largest amount in a year.

Following the report’s release, stock futures experienced fluctuations, and Treasury yields rose.

Analysts suggest the figures reinforce concerns that consumer spending is weakening, with tariffs potentially reigniting inflationary pressures and hindering economic growth. Companies, investors, and economists are adopting a cautious outlook amid declining consumer sentiment and increasing signs of financial strain.

Low-income consumers are already feeling the pinch, while wealthier Americans may also reduce spending due to recent stock market volatility discouraging significant investments.

The retail data showed so-called control-group sales – a metric used to calculate goods spending for gross domestic product – increased 1% in February, reversing the prior month’s drop. This measure excludes food services, auto dealers, building materials stores, and gasoline stations.

Adding to the unease, a separate report released Monday revealed a decline in New York state manufacturing activity in March, reaching its lowest level since early 2024. Concurrently, measures of prices increased, aligning with expectations of slower growth and accelerating inflation in the wake of the imposed tariffs.

Reconciling growth concerns while reassuring investors about the economy’s stability will pose a significant challenge for Federal Reserve Chair Jerome Powell this week. He is scheduled to speak at the conclusion of the central bank’s meeting on Wednesday, where policymakers are widely expected to maintain steady interest rates.

Retailers such as Target Corp. and Best Buy Co. have indicated they may be forced to raise prices due to the tariffs. Furthermore, weak outlooks from companies like Kohl’s Corp. and Dick’s Sporting Goods Inc. are casting doubt on the strength of the U.S. consumer.

It’s important to note that the retail sales figures are not adjusted for inflation and primarily reflect purchases of goods, which constitute a relatively small portion of overall consumer spending.