Consumer spending in February exhibited a slower than anticipated growth rate as concerns over inflation and potential economic slowdown lingered. However, underlying data still suggests a solid performance despite these worries.

February Sales Performance Overview

According to an advanced report released by the Commerce Department, retail sales rose by 0.2% in February. This figure is a noticeable improvement from the previously revised decline of 1.2% reported for January. Nevertheless, it fell short of the Dow Jones forecast which anticipated a growth of 0.6%.

When excluding auto sales, the month-over-month increase was 0.3%, aligning with analysts’ expectations. It’s important to note that while these figures are adjusted for seasonal fluctuations, they do not account for inflationary factors. The Labor Department reported a 0.2% increase in prices during the same month, indicating that spending growth kept pace with inflation.

Control Group Performance

In a related measure, the control group—which omits certain volatile sectors and directly impacts gross domestic product (GDP) calculations—saw a remarkable 1% increase, exceeding forecasts.

Market Reactions

Following the retail sales report, stock markets, which had recently entered correction territory, saw gains. Additionally, longer-term Treasury yields experienced a slight uptick.

Robert Frick, corporate economist at Navy Federal Credit Union, stated, “Not a great report, but one still in positive territory despite how pessimistic consumers are about the future.” Frick further highlighted that consumer spending trends are heavily influenced by income levels, which have shown considerable growth, particularly in January.

Segment Performance Insights

Certain categories contributed positively to the overall sales figure:

• Online retailers experienced a significant boost, reporting a 2.4% increase.
• Health and personal care sectors saw a 1.7% rise.
• Food and beverage outlets reported a modest 0.4% increase.

Conversely, the dining sector faced challenges, with bars and restaurants registering a 1.5% decline. Additionally, gas stations reported a 1% decrease, coinciding with lower fuel prices.

Year-over-Year Comparisons and Economic Concerns

Year-over-year, sales increased by 3.1%, outpacing the 2.8% inflation rate as indicated by the consumer price index, offering a silver lining amid broader economic concerns.

Despite this growth, the report included troubling revisions for January, which now reflects a revised decline of 0.9% from earlier estimates.

The retail sales data emerges during a period of heightened economic uncertainty, exacerbated by ongoing tariff disputes led by President Donald Trump with primary trading partners. Economists express concern that these tariffs could exacerbate inflation and hinder economic growth.

Elizabeth Renter, a senior economist at NerdWallet, noted, “Consumers and businesses are expected to pull back on spending when they’re unable to make informed decisions about the future of the economy and their place within it.” She emphasized that fluctuating economic policies make it challenging for consumers to navigate financial decisions effectively.

Manufacturing Activity Indicators

In related economic news, the New York Federal Reserve’s Empire State Manufacturing Survey revealed a sharp decline in manufacturing activity for March, with the index dropping to -20, signifying a contraction and well below the -1.8 estimate.

New orders also saw a substantial downturn, with the index plummeting by 26.3 points to -14.9. This downturn in shipments and inflationary pressures, as indexed by prices paid and received, raises further concerns about the manufacturing sector’s stability.