Retail sales in the U.S. rose by 0.6% in February, marking a rebound from a revised 0.1% decline in January, according to new data from the Commerce Department. The increase follows a period of reduced spending in January due to severe winter storms. However, economists warn that rising gasoline prices, driven by the ongoing Iran war, could dampen consumer spending in the coming months.
Core Facts & Developments
- Retail sales increased by 0.6% in February, reversing a 0.1% decline in January.
- Gasoline prices surged past $4 per gallon, a level not seen since 2022, with the national average hitting $4.06.
Deeper Dive & Context
Sector-Specific Growth
Sales at motor vehicle and auto parts dealerships rose by 1.2%, while excluding this sector, retail sales increased by 0.4%. Clothing and accessories stores saw a 2% rise, and electronics and appliance stores reported a 0.5% increase. Online retailers experienced a 0.7% growth, and health and personal care stores saw a 2.3% boost. Restaurant sales, the only services category included, rose by 0.4%.
Economic Concerns
Economists caution that the Iran war’s impact on gasoline prices was not fully reflected in February’s retail sales data. The war has pushed gas prices up by $1 per gallon compared to pre-war levels, raising concerns about its effect on consumer spending. While higher gas prices may temporarily boost sales figures (since retail data is not inflation-adjusted), real spending could decline as consumers cut back on discretionary purchases to offset fuel costs.
Expert Perspectives
Ksenia Bushmeneva, an economist at TD Bank Group, described the retail sales report as solid but noted that real spending may suffer due to rising fuel expenses. The data does not include travel or hotel spending, limiting its scope.
Long-Term Implications
The combination of elevated inflation and escalating gas prices poses a risk to sustained consumer spending. If the Iran war continues to drive up fuel costs, economists predict a potential slowdown in retail sales growth in the coming months.