Americans pulled back on their spending in February, after a strong January
By Alicia Wallace, CNN
Americans pulled back on their spending last month after a surprisingly spendy January.
US retail sales fell 0.4% in February from the month before, the Department of Commerce reported on Wednesday.
That drop, which was adjusted for seasonal swings, was greater than economists’ expectations of a 0.3% decline, according to Refinitiv estimates.
“There’s a lot of uncertainty right now, and many consumers are probably going to play it safe until something changes, for better or for worse,” Randall Sargent, a partner at Oliver Wyman in the consultancy’s retail and consumer goods practice, told CNN Business in an interview.
Year-on-year retail sales data, which is not adjusted for inflation, was up 5.4%.
Factoring in the 0.4% increase in consumer prices, as seen in the February Consumer Price Index report released Tuesday, real sales fell 0.8%.
Some of the largest monthly declines were in food services and drinking places (-2.2%), department stores (-4%), furniture and home stores (-2.5%), and auto dealers (-1.8%).
“With labor market conditions poised to cool further amid tighter financial conditions and growing financial market uncertainty likely to dampen households’ willingness to spend, we foresee soft consumer spending growth in coming quarters,” said Gregory Daco, chief economist at EY Parthenon.
“Recent data on household spending and credit growth indicate that we will likely see a K-shaped consumer spending pattern in 2023, with low- and median-income families exercising more spending restraint, and families at the higher of the income spectrum still spending, albeit with more discretion,” he said.
The February data shows that consumers eased up on spending after a stronger-than-expected start to 2023. In January, consumers splurged after a muted holiday season. January retail sales rose an upwardly revised 3.2%, according to data from the Commerce Department’s Census Bureau.
Inflation has been moderating some, but the declines are not enough to shift behaviors for consumers whose household finances have been heavily impacted by the persistently high inflation during the past year, said Oliver Wyman’s Sargent.
“Over the last year, consumers have had to make tough decisions and stop buying certain things that were part of their regular purchase pattern,” she said. “Some of that might come back [as inflation comes down], but at lower prices, I don’t think that’s really going to expand retail sales in the short term.”
Wednesday’s retail sales report is expected to factor into the discussions and decision-making processes during next week’s Federal Open Market Committee meeting. Federal Reserve policymakers are weighing how much to further tighten monetary policy to bring down high inflation while also being mindful of recent instability within the banking sector.
“The decline in producer prices [data separately released Wednesday] coupled with a pullback in retail sales is certainly good news for the Federal Reserve, particularly as it has to focus on maintaining financial stability amid bank meltdowns domestically and abroad,” said Quincy Krosby, chief global strategist for LPL Financial.
“While the market this morning is under pressure with Credit Suisse’s ongoing issues, the specific inflation-related news should help assure the Fed that its campaign to quell inflation is moving in the right direction.”
The-CNN-Wire
™ & © 2023 Cable News Network, Inc., a Warner Bros. Discovery Company. All rights reserved.
