U.S. retail sales rebounded in February, though the weaker-than-expected numbers point to lingering concerns about the broader economy.
Retail sales rose 0.2% in February from the previous month, according to data released Monday by the U.S. Census Bureau. While the increase fell short of economists’ forecast of 0.6% growth, it marked a rebound from January’s decline, which was revised down to a sharper 1.2% drop.
After a brief setback in January, February’s retail sales signaled a return to the upward trajectory seen over the previous four months. Economists said the modest increase doesn’t necessarily indicate broader weakness, noting that cooler spending could help ease inflationary pressures and may be a reassuring sign amid political uncertainty, shaky economic policy, and declining consumer sentiment.
“We should all feel relief that we didn’t see a lower number or a decline for February,” said Tuan Nguyen, economist at RSM US LLP.
Economists often focus on a measure of underlying demand, which excludes non-core sector spending such as autos, gas, building materials, and food services. This core group rose 1% in February, beating expectations and signaling steady consumer demand in categories tied directly to gross domestic product (GDP) calculations.
Many discretionary categories continued to decline, with sales down 0.4% at sporting goods and hobby stores, 0.6% at clothing retailers, and 0.3% at electronics and appliance stores. The two categories that saw the most growth were e-commerce sales, which climbed 2.4%, and health and personal care stores, which saw a 1.7% increase over January.
The pullback in discretionary spending could reflect consumers’ worries regarding shifts in economic policy as the Trump administration has continued its aggressive overhaul of U.S. trade strategy. February, in particular, was marked by heightened uncertainty surrounding tariffs.
A planned 25% tariff on Canadian and Mexican imports, set for February 4, was delayed after border security concessions, briefly reinstated, then postponed again. Meanwhile, a 10% tariff on Chinese goods took effect on February 4 and was later raised to 20%. These shifting policies and ongoing trade tensions may be weighing on consumer confidence.
The University of Michigan’s Consumer Sentiment Index fell to 57.9 in March, an 11% drop from February’s reading of 64.7. It was the lowest level since November 2022, reflecting growing caution among consumers amid mounting economic uncertainty.
Businesses also feel the strain, as many are forced to adapt their models in response to fluctuating prices. Anandita Yadav, founder of Zillajee, a North Carolina–based small business specializing in cotton lounge and sleepwear, said she has had to make difficult choices to stay afloat.
“Rising inflation and rising costs of goods and logistics has forced us to increase our product prices recently,” Yadav said.
Despite wanting to keep prices accessible for customers, Yadav added “it was a difficult decision but one that I had to make in order to keep my business profitable, so it’s worth my time and energy.” In particular, the rising cost of shipping and goods impacted her business. The price hike initially led to a significant slowdown in sales, Yadav noted, but sales have since begun to recover.
Consumer prices rose 0.2 percent on a seasonally adjusted basis in February, after rising 0.5 percent in January and were up 2.8 percent from a year earlier—above the Federal Reserve’s 2% target—according to a Wednesday report from the Bureau of Labor Statistics.
Despite all of these factors, economists believe the retail sales report’s results remain relatively positive. Other factors, like winter weather, could have impacted how consumers chose to spend their money.
“I would just take this with a grain of salt, I wouldn’t say this is early confirmation that the consumer has stepped back meaningfully, ” said Thomas Simons, Chief US Economist, Jefferies LLC.
