Following a weak retail sales report in January, February spending data saw some improvement but still came in below consensus. Retail spending rose by 0.6% from the previous month, following a 1.1% m/m decline in January (revised down from -0.8%). After adjusting for inflation using CPI data, real February spending growth was up 0.1% from February. Notably, the Jan-Feb average was down 5.6% annualized from the Q4 2023 average.*

While these data showed some improvement from the January figures they were generally tepid. Core retail sales, which exclude building supplies, gasoline stations, and motor vehicles, were flat from the previous month. Additionally, the weakness seen in the January retail sales data was revised even lower and December growth was revised down as well. This report shows cautiousness among US consumers as income growth slows, savings are exhausted, and debt levels rise. Looking ahead, we expect this trend to continue as consumers reassess their financial proprieties.

Key drivers of retail sales in February:

Consumer demand for goods rose by 0.6% from the month prior in nominal terms. Spending on motor vehicles and parts rose by 1.6% in February from January, while retail sales excluding motor vehicles rose by 0.3%. Spending at gasoline stations rose by 0.9% from the month prior due to an uptick in gasoline prices. Retail sales, less motor vehicles, gasoline, and building supplies (known as “Retail Control”) was flat from the previous month. Spending on building supplies and at electronics and appliances stores saw strong sales for the month, but spending on clothing and personal care contracted. When adjusting goods spending for CPI inflation, the real growth rate was about 0.2%.*

Meanwhile, spending at food services and drinking places rose by 0.5% month-over-month in February. After adjusting for CPI inflation the real growth rate was about +0.8%.*

* Real growth rates are The Conference Board estimates based on Census Retail Sales data and BLS CPI data.