US Retail Sales Post Tepid Growth in February

Although retail sales fell more than previously published in January, they didn't take long to recover. As predicted, warmer February weather encouraged consumers to start spending again. That said, sales were still down from last fall.

As expected since the data on new motor vehicle sales was released early this month, the rebound was partly driven by car dealerships, where sales jumped 1.6%. That's the most they've grown since May 2023. Higher gasoline prices also played their part, with gas station receipts up 0.9% month−on−month.

The 0.3% uptick in sales excluding motor vehicles and gasoline was less impressive, but is nevertheless promising after a 0.8% plunge in January, the worst decline since March 2023. The biggest gains came from sales at building materials stores (+2.2%), which had also plummeted in January (-4.3%).  Food services also rebounded after dropping in January. Electrical equipment was up once again after rising in January.

But some weak spots remain. For the first time since 2013, nonstore retailers have slid for two months in a row. Clothing store sales retreated 0.5% (after losing 0.8% in January), even though CPI data showed prices rising 0.6% in this sector. Meanwhile, furniture stores lost 1.1% month−on−month (-10.1% year−on−year). This was probably due to high interest rates and a decrease in term loan approvals in the United States.

After rising rapidly in the last half of 2023, consumer spending will probably post more tepid growth for the first quarter of 2024. Retail sales for January and February suggest there may not have been any real increase in goods consumption. A sudden resurgence in March would help matters, but we nevertheless feel that US consumers are losing momentum. High interest rates, a downturn in consumer credit and reduced accumulated savings are all factors that could slow consumption in the first half of 2024.