MW U.S. retail sales barely rise, but investors see glimmer of good news in seemingly weak report
By Jeffry Bartash
Investors focus on 'control group' effect on GDP
The numbers: Retail sales in the U.S. barely rose in February in a disappointing sign, but investors latched onto another figure in the report that suggested the weakness might not be as bad as it looked.
Sales at U.S. retailers rose a scant 0.2% last month, the government said Monday, and showed little rebound after a sharp decline in January.
The increase also fell well short of the 0.6% forecast of economists polled by The Wall Street Journal.
Yet another figure in the report known as the "control group" that feeds directly into gross domestic product jumped almost 1%. That category excludes autos, gasoline, building materials and restaurants.
The rebound in the so-called control group suggests retail sales won't be a big drag on first-quarter GDP as it might have seemed a month ago. Investors appeared to cheer the news, driving stocks higher in Monday trades.
Still, the first two months in 2025 of total retail sales suggest the economy has slowed a bit early in the new year.
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.
Retail sales represent about one-third of all consumer spending and offer clues on the health of the economy.
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. The series of trade wars launched by the 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.
Key details: Most of the rise in spending last month was concentrated in online stores and pharmacies. Other retailers reported soft or negative sales.
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 1.7% 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.
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.
U.S. retail sales sank a revised 1.2% in January, largely because of bad weather and a post-holiday lull.
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 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 10:53 ET (14:53 GMT)
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