MW Retail sales in the U.S. barely rise. Is the economy slowing?
By Jeffry Bartash
Weak consumer spending points to lower GDP
The numbers: Retail sales barely rose in February, in another sign the economy might be softening as businesses and consumers digest rapid-fire changes being made by the Trump White House.
Sales at U.S. retailers rose a scant 0.2% last month, the government said Monday. Economists polled by the Wall Street Journal had forecast a 0.6% increase.
Most of the rise in spending last month was concentrated in online stores and pharmacies. Other retailers reported soft or negative sales.
Retail sales are being watched closely to see if President Donald Trump's tariffs and deep cuts to the federal workforce are hurting the economy. Consumer confidence has fallen to a 21/2-year low.
Sales sank a revised 1.2% in January, largely because of bad weather and a post-holiday lull. Cold weather may have also been a factor in last month's soft sales.
Retail sales represent about one-third of all consumer spending and offer clues on the health of the economy. In 2024, retail sales rose a solid 4.4%.
Big picture: Retailers and other companies were initially optimistic about the new year in anticipation of lower taxes and less regulation by the Trump administration. Yet the series of trade wars launched by president have dented the confidence of businesses and consumers and sent the stock market plunging.
Economists say the future of the economy is likely to remain cloudy until the trade wars are resolved. Higher tariffs could raise inflation and force the Federal Reserve to keep interest rates high. High borrowing costs tend to slow the economy.
Key details: Internet retailers posted a healthy 2.4% increase in sales, helped by a cold February. Online shopping tends to rise when the weather is bad.
Sales also rose sharply at pharmacies and personal-care stores.
The rest of the retail segment was weak. Sales of cars and trucks fell for the second month in a row. Automobile sales account for one-fifth of all retail sales.
Gasoline sales also dropped 1%, though the decline reflected lower prices, a good thing for consumers.
If gas and automobiles were omitted, retail sales rose a decent 0.5% last month.
Perhaps the most critical category, restaurant sales, offering a warning sign. Sales fell 1.5% last month - the biggest decline in 13 months - and business has been very slow so far this year
People tend to buy more prepared food when they are confident in the economy. They eat out less when they are anxious or worried about the economy.
The miserly retail-sales figures for February and January suggest a mild first-quarter increase in gross domestic product, the official scorecard for the economy.
Looking ahead: "Not a great report, but one still in positive territory despite how pessimistic consumers are about the future," said corporate economist Robert Frick of Navy Federal Credit Union.
"But the main factor in consumer spending is consumer income, and that's growing at a good rate and had an impressive leap in January," he added. "Consumers have shown just in the recent past that despite deep worries over inflation and COVID, they'll still spend if the dollars are there."
Market reaction: The Dow Jones Industrial Average DJIA and S&P 500 SPX rose slightly in Monday trading.
-Jeffry Bartash
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
March 17, 2025 09:47 ET (13:47 GMT)
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