Retail sales have not fully recovered from a harsh January dip, but a rebound in February shows continuous consumer spending.
Advance monthly retail sales and food services increased by 0.6 percent, in February, to a seasonally adjusted $700.7 billion according to the Department of Commerce report released Thursday, slightly below the average 0.8 percent estimate surveyed by Bloomberg.
The January decline was revised to 1.1 percent from 0.8 percent, further widening the gap between January and February retail sales.
The retail sales were boosted by, increased automobile sales, an increase in building material and garden equipment sales. These categories had been the most affected last month due to harsh weather conditions.
“Winter weather related refinery issues added up to be significant and started to drive prices up” Patrick De Haan, head of Petroleum analysis at GasBuddy commented. GasBuddy is a crowdsourced price tracker app that helps users get the best gas price value in their area. “Outside of that it's also normal that by mid February gas prices start their seasonal increase.”
Food services and drinking places showed strength.
“Service spending has been very strong in the past three to six months and because of that the consumption component of GDP in the 4th quarter of 2023 was very robust and we’re expecting not the same level but still a very strong consumption component of GDP in the 1st quarter” Tuan Nguyen, economist at RSM US LLP commented.
As winter weather fades away, more consumers are coming out of hibernation and are ready to get back outside.
“I’ve have had more customers coming in, they come with their whole families, sit down and have a good time.” said Angel Allema, Organic Food restaurant owner, in Jackson Heights, Queens “I think that because the weather is nicer and the kids had break, they came out to have some fun.”
Home furniture sales were weak in February and apparel sales were weak in both January and February.
However, only 4 out of the 13 categories posted a decline in February further showing the resilient strength of the American consumer.
“Overall it’s a quite encouraging report because if you look at the last six months, this actually shows the fastest growth rate since September for retail sales.” Said Nguyen.
The declines are not necessarily something to worry about, as we are still seeing the effects of the post holiday spending hangover. Consumers purchased many goods during the holiday season and have incurred heavy credit card debt, so it’s no surprise they cut back on spending in January.
Now that they’ve caught their breath, they are wearily stepping back into spending as the strong job market propels them forward.
The American consumer continues to rely on some savings accumulated in the pandemic, a strong labor market and an increase in average hourly earnings.
In February 275,000 jobs were added to the market and the average hourly earnings rose up to $34.57 according to the Bureau of Labor statistics.
Although consumer confidence is high, prices continue to rise causing concern and holding back consumers from spending unnecessarily.
“Growth in food spending has slowed down significantly from the earlier trend and that's another really good indication that a big chunk of households are struggling to make ends meet” said Christopher Low, chief economist at FHN Financial says
