WASHINGTON โ In February, U.S. consumers slightly increased their spending following a notable decrease in January, indicating a cautious approach to shopping due to rising concerns about economic trends. The Commerce Department reported a modest 0.2% rise in retail sales for February, recuperating somewhat from a 1.2% decline in January. Gains were observed in grocery, home and garden, and online retail sectors, while sales dropped in the automotive, restaurant, and electronics categories.
This slight upturn reflects a growing wariness among Americans spurred by the volatile stock market, tariff tensions under President Donald Trumpโs administration, and potential government spending cuts, which have fueled widespread uncertainty. Though some economists found respite in the numbers not being worse, consumer spending is anticipated to grow at only 1% to 1.5% annually this quarter, a sharp falloff from last quarterโs 4.2% increase.
Economist Stephen Brown of Capital Economics noted, โConsumer spending is on track to slow sharply this quarter, but not by as much as we previously feared.โ Compounding these concerns, a measure of consumer sentiment dropped significantly for the third consecutive month, now over 20% lower than in December, as per a University of Michigan survey. This decline was attributed to policy uncertainty, with stark differences in views between Republicans and Democrats.
Consumers from various income brackets are feeling the pinch. Austin, Texas resident Hunter Simmons has become more economical in his shopping habits, opting for cheaper grocery items and strategizing fuel purchases due to economic uncertainties. โI am not a big spender in general, but I have been cutting back in small ways,โ he explained.
Recent earnings reports from major retailers like Walmart, Macyโs, and Dollar General noted a downward trend in consumer expenditure. Walmart, a key indicator firm in the retail sector, shared a cautious outlook last month due to tariff uncertainties.
Sales declines in February were also noted at gas stations, clothing, and sporting goods stores. The figures, unadjusted for prices, showed that falling gas prices likely contributed to some of these downturns. However, excluding gas and autos, retail sales increased 0.5%, a healthier figure than Januaryโs 0.8% decrease.
Furthermore, the National Association of Homebuilders reported a dip in builder sentiment to its lowest in seven months, driven by economic doubt and reduced buyer interest. They highlighted fears around tariffs inflating new home costs by $9,200.
Macyโs reported customer unease across its chains, including Bluemercury and Bloomingdaleโs, with CEO Tony Spring remarking on the affluent clienteleโs shared concerns about economic developments.
While job hiring remains stable, protecting consumer spending for now, any forward economic deterioration could jeopardize this balance. Dollar Generalโs CEO Todd Vasos reported that the economic climate has prompted the closure of about 100 stores, as customers grapple with inflation and financial constraints.
Changes in consumer behavior have also been observed at Costco, where customers now prefer less costly meats such as ground beef and poultry. American Eagle Outfitters CEO Jay Schottenstein echoed the heightened anxiety among younger consumers, noting their caution amid economic challenges.
The retail sales figures primarily highlight goods and dining purchases, yet signals suggest reduced spending on services too, as evidenced by dropping bookings noted by airline executives at a recent industry conference. Delta CEO Ed Bastian highlighted concerns surrounding economic sentiment and consumer confidence.