February Retail Sales Rebound But Consumers Remain Cautious

Retail sales in February inched higher as consumers continued to keep a close eye on product pricing and the unpredictable nature of new policies emanating from Washington. 

The Census Bureau said overall retail sales in February were up 0.2% seasonally adjusted month-over-month and up 3.1% unadjusted year-over-year. That compared with a decrease of 1.2% month-over-month and an increase of 3.9% year-over-year in January.

“Lower-than-expected consumer spending in the first couple of months of the year likely reflected payback for very strong spending in the fourth quarter and weather-related events since then,” said Jack Kleinhenz, chief economist with the National Retail Federation (NRF). “These results show that households are apprehensive and carefully navigating lingering inflation and turmoil related to changing economic policies.”

February’s core retail sales as defined by NRF — based on the Census data but excluding automobile dealers, gasoline stations, and restaurants — were up 0.9% seasonally adjusted month-over-month but down 0.2% unadjusted year-over-year. Core sales were down 1.2% year-over-year on a three-month moving average.

The recent CNBC/NRF Retail Monitor, powered by Affinity Solutions, reported that core retail sales were down 0.22% seasonally adjusted month-over-month in February but up 4.11% unadjusted year over year. That compared with a decrease of 1.27% month-over-month and an increase of 5.72% year-over-year in January.

Regardless of the softer spending, Kleinhenz said consumer fundamentals remain healthy and intact so far, supported by low unemployment, steady income growth, and other household finances. 

Chip West, retail and consumer behavior expert with RRD — a provider of marketing, packaging, print, and supply chain solutions — believes the mindset of many consumers is reactionary and affected by ever-changing economic and policy information. 

“Negative news one day can evolve into positive news a few days later,” he said. “Retailers should be prepared to continually align their marketing to attract value-seekers when they are in ‘savings mode,’ especially after absorbing varying economic news. Retailers also need to be ready to motivate these same consumers who are likely to splurge on a purchase, perhaps a more discretionary one, when favorable reporting has them feeling good.”

West added that the continued expansion of private-label offerings, especially at major grocers and mass retailers, also reflects shifting consumer behavior, with more shoppers seeking cost-effective alternatives amid ongoing inflation concerns.