Retail sales declined in February as consumers pulled back after a stimulus-fueled splurge in January and as freezing temperatures plagued Texas and other Southern states.

Sales declined 3 percent, a larger decrease than expected and a stark contrast to January’s 7.6 percent increase. Economists surveyed by Bloomberg on average predicted sales would decline by less than one percent. Despite diminished sales in February, average sales from December 2020—February 2021 are up 6 percent from the same period last year. 

Higher spending compared to last year is a positive sign for economic growth overall. But February’s drop suggests that big upticks in retail sales, like the uptick seen in January, are driven by government stimulus checks.

Swings in retail sales are “mostly reflecting the timing of the stimulus payments,” said Steven Gallagher, chief economist at Société Générale.

By February, many consumers who received $600 stimulus checks at the beginning of the year had spent them. At the same time, consumers had less spending money than expected because a later-than-usual tax filing window prevented many from quickly receiving refunds.

With stimulus checks driving retail sales surges, it is unclear if consumer spending will decrease in future months as stimulus money dries up. But economists are optimistic that January and February retail sales combined represent the beginning of a strong economic recovery.

“You have to look at January and February together. It shows the U.S. has started on a really strong footing,” said James Knightley, chief international economist at ING Financial Markets LLC.

Factors like extreme weather can also impact consumer spending significantly, and freezing temperatures, which forced consumers in some parts of the country to stay indoors in February, contributed to falling sales.

“We had very mild weather in January and very bad weather in February, which subtracted [from total sales]. You take the two months together and you’re still up pretty strongly year over year,” said Scott Brown, senior vp and chief economist at Raymond James & Associates, Inc.

Economists predict a drastic rise in retail sales in March, catalyzed by the $1,400 stimulus checks distributed as part of the recently-passed $1.9 trillion stimulus package.

“We’ll see a massive March due to the stimulus,” said Strider Elass, senior economist at First Trust Portfolios LP.

Brooklyn business owner Ann Cantrell says her shop experienced a revenue bump in 2021 compared to last year, and is optimistic about where the economy is heading.

Since fall 2020, Cantrell’s shop, Annie’s Blue Ribbon General Store, has enjoyed a steady stream of foot traffic. The general store has had more weekday traffic, which Cantrell attributes to more community members working from home.

“In Brooklyn, a lot of people who worked in Manhattan are not going to that job anymore, to those stores that would have been by their job, and instead are keeping it in the neighborhood,” she said.

Although e-commerce spending declined 5.4 percent in February, it remains 25.9 percent higher than in February 2020, an increase that signals a pervasive shift to online shopping. During the same period, department and clothing stores suffered.

E-commerce trends have accelerated since the pandemic, and this has “come at the expense of the brick and mortar retailers,” said Brown.

In January, the $600 economic stimulus was an unexpected boon to department stores, but that trend didn’t continue in February as consumer spending in the category decreased by 8.4 percent.

Department stores, which were less popular with consumers even before the pandemic, continue to lose ground. From December 2020 to February 2021, spending at department stores declined 14.7 percent compared to the same period the previous year.

Clothing stores also decreased in February and in-store spending on clothing is down compared to this time last year. In February 2020, in-store clothing shoppers spent $22.1 billion, compared to the $19.6 billion they spent last month.

Edison Thalman, a store associate at a Salt Lake City-based J.Crew store says she believes the store she works at is roughly 80 percent as busy as it was at the beginning of 2020. Despite an obvious increase in business more recently, the store still has reduced weekday hours. Thalman says associates still get fewer hours and this has led to fewer workers doing more work. “I know quite a few associates at J.Crew that are rarely scheduled,” said Thalman.

At the same time, Thalman says there has been an increase in in-store returns of clothing purchased online. “I think that the future of retail shopping is a lot more online and fewer associates,” she added.

Spending on food services and drinking places in February declined two percent, indicating that relaxed restrictions in several states did little to benefit food services overall. New York City approved indoor dining at restaurants in December and in early March relaxed restrictions on New York City restaurant capacity levels by 10 percent. Cold weather in other parts of the country likely offset any possible increase in food and beverage sales.

“It could be that the bad weather completely crushed the gains we’ve seen elsewhere,” said Knightley.

Photo by Arturo Rey on Unsplash