Retail sales rebounded in February, rising at a modest pace after falling sharply in January.
Sales rose by 0.2 percent in February following a downwardly revised 1.2 percent drop in January. The rebound provides reassurance that the prior month’s steep decline was likely the result of harsh winter weather and California wildfires rather than a sudden emergence of economic weakness.
Economists had expected a 0.6 percent gain. The miss can mostly be chalked up to weaker-than-expected auto sales. Excluding autos, sales rose by 0.3 percent, in line with expectations.
Even in auto sales, there is a silver lining. Some analysts had expected consumers and businesses to hoard goods ahead of rising tariffs, especially in the auto sector. That raised the worry that a surge in buying could push up prices. The lower-than-expected sales in autos indicate that consumers have not reacted to the Trump administration’s tariff plans by pre-emptively buying.
The report is also likely to calm fears that the economy could be contracting or headed into a recession. The segment of the report that directly factors into the Commerce Department’s GDP calculations—known as the control group—climbed 1 percent, much more than economists expected. Despite a slight downward revision to January’s control sales, this indicates that while economic growth likely cooled in the first quarter, it did not shrink. That measure excludes sales at restaurants, auto dealers, building materials stores, and gasoline stations.
The most troubling part of the report may be the 1.5 percent decline in restaurant sales. This is a highly discretionary category of consumer spending that could indicate households pulling back or pre-emptively saving ahead of an anticipated downturn. there were also declines in sales at clothing stores, electronics stores, and the recreational category that includes sports equipment and book stores.
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