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On March 17, the Census Bureau released results for retail sales in the month of February. These numbers are particularly useful because they help tell the story about what consumers are spending on vs. where they are penny pinching as well as what they prize on the budgetary front. It is also key to bear in mind that potential for tariffs, uncertainty around inflation, and a holiday spending hangover are part of the equation heading into the month.
Let’s take a look.
Total sales eked up to $722.7 billion from $721.3 billion in the month. Although a higher number often signals growth and growth often correlates with positivity or good news, Chip West, a consumer expert and commentator with RRD, cautioned, “While any growth is positive, the slower pace suggests many consumers are holding back, weighing inflation, job stability, and broader economic conditions. Colder weather and delays in tax refunds also played a role in the sluggish start to the month.”
Neil Saunders, managing director of GlobalData, was a bit less optimistic overall. “Ouch is the best way to describe this month’s retail sales numbers,” he declared, adding that it represents the “weakest performance since the depths of the pandemic.”
As we drill down, the report also showcases changes in consumer spend by category. In February, categories were mixed, with some on the rise and others in decline. Non-store retailers was the biggest winner this time around, rising to $125.7 billion from $122.7 billion a month prior. Often a strong performer each month, this group includes sales through catalogs, infomercials, and vending machines, according to the Census Bureau.
Other categories that performed well in February included food and beverage stores, which rose to $85.1 billion from $84.8 billion, with grocery stores, a subcategory, rising to $76.3 billion from $76 billion. Health and personal care saw a rise to $38.6 billion from $37.9 billion, and general merchandise rose to $77.3 billion from $77.1 billion. Department stores, another subcategory, fell slightly to $10.7 billion from $10.8 billion. Other winners included building materials and garden supplies, which ticked up to $40.1 billion from $40 billion, and furniture and home furnishings, which were flat at around $11.6 billion.
Remarking about groceries and the strength therein, West said, “Food prices rose by 0.2%, fueled by increases in the indexes for eggs, meats, poultry, fish, and beef.” He also noted that the big game likely “played a role in driving grocery sales, particularly for party staples and bulk purchases.”
Food services and drinking places declined to $95.4 billion from $96.9 billion while motor vehicle parts and dealers slipped to $138 billion from $138.5 billion. Gasoline stations also fell to $52.8 billion from $53.3 billion, while clothing tumbled to $26.3 billion from $26.5 billion.
“Before everyone runs around declaring that the sky is falling, there are two important points of context to the February numbers,” explained Saunders. The first culprit was one less trading day given the 28-days in February. The second, “disruptive to trade was weather” he continued, noting that during the storms, consumers opted to stay home and spent less.
“Like the leap year calendar shift, this is a temporary factor that is not a signal of impending economic doom,” according to Saunders. “Nor is it a reliable indicator of where retail will trend across the balance of the year.”
March numbers are expected to drop on April 16, and while weather, spring spending, and holidays could play a role in robust or weak results, it’s also important to take a tip from our experts. “We should have a clearer picture of how resilient consumers are coping with the volatility that is likely to stick around,” wrote Chip West. “I predict they will continue to seek out both familiar and new destinations for savings that will help stretch their household budgets and bring them value with their purchases.”
NB: Unless otherwise indicated, dollar amounts in this article are adjusted for seasonal variation and for holiday and trading day differences, but not for price changes.
