US Retail Sales Show Tepid Growth Amid Economic Anxiety

ByAva Sinclair

American consumers increased their spending only slightly in February, signaling growing caution as economic uncertainty rises across the country. The modest uptick follows a significant pullback in January, suggesting shoppers at all income levels are becoming more hesitant in their purchasing decisions.

Retail sales rose just 0.2% in February, the Commerce Department reported Monday, falling short of the 0.6% increase economists had projected according to The Wall Street Journal. This modest growth came after a sharp 1.2% decline in January, which was revised downward from previous estimates.

Mixed Performance Across Retail Sectors

The February retail report revealed a mixed performance across different sectors. Online retailers showed the strongest performance with nonstore retailers reporting a 2.4% increase, according to CNBC. Health and personal care stores saw a 1.7% gain, while food and beverage outlets experienced a modest 0.4% rise.

Several sectors experienced declines, with restaurants and bars showing a 1.5% decrease. Auto dealers, electronics stores, and gas stations also reported lower sales, with gas station figures partially reflecting falling prices at the pump rather than reduced consumption.

When excluding volatile auto sales, retail spending increased 0.3%, matching economists’ expectations. The so-called control group, which strips out noncore sectors and feeds directly into GDP calculations, rose a better-than-expected 1%, providing a bright spot in an otherwise subdued report.

Consumers Growing More Cautious

The tepid growth in consumer spending comes amid rising anxiety about the economy’s direction. On Friday, the University of Michigan’s consumer sentiment measure fell sharply for the third consecutive month, dropping more than 20% since December, as ABC7 New York reported.

Respondents to the University of Michigan’s survey cited policy uncertainty as a leading reason for their increasingly pessimistic outlook. The sentiment split along party lines, with Republicans showing less concern about current economic conditions than Democrats, though Republicans’ confidence in the economy’s future dropped 10%.

“Consumers and businesses are expected to pull back on spending when they’re unable to make informed decisions about the future of the economy and their place within it,” Elizabeth Renter, senior economist at personal finance site NerdWallet, told CNBC. “Currently, direct economic policies and broad federal policies with indirect economic impact are in flux, making informed decisions difficult.”

Retailers Report Consumer Strain

Major retailers have reported that consumers across all income brackets are feeling financial pressure. Walmart, the nation’s largest retailer, released a weak outlook last month, citing uncertainty around tariffs imposed by the Trump administration.

Dollar General’s CEO Todd Vasos painted an even bleaker picture during a recent earnings call. “Our customers continue to report that their financial situation has worsened over the last year as they have been negatively impacted by ongoing inflation,” Vasos said, according to ABC7 New York. “Many of our customers report that they only have enough money for basic essentials, with some noting that they have had to sacrifice even on the necessities.”

Manufacturing Also Shows Signs of Weakness

Adding to economic concerns, the New York Federal Reserve’s Empire State Manufacturing Survey posted a reading of -20 for March, a significant drop from February’s 5.7 reading and well below the estimated -1.8. The figure represents the difference between companies seeing expansion versus contraction.

New orders tumbled to -14.9, down 26.3 points, while shipments also declined substantially. These manufacturing figures, coupled with the retail sales data, have intensified concerns about overall economic growth in the first quarter.

Inflation and Employment Factors

The retail sales figures are not adjusted for inflation, which rose 0.2% in February according to previous Labor Department reports. This suggests that real spending was roughly flat when accounting for price increases.

Despite growing economic anxiety, the job market has remained relatively stable. “Not a great report, but one still in positive territory despite how pessimistic consumers are about the future,” Robert Frick, corporate economist at Navy Federal Credit Union, told CNBC. “But the main factor in consumer spending is consumer income, and that’s growing at a good rate and had an impressive leap in January.”

Year-over-year, retail sales increased 3.1%, outpacing the 2.8% inflation rate as measured by the consumer price index. This suggests that despite short-term fluctuations, consumer spending continues to grow modestly in real terms.

As economic indicators send mixed signals and uncertainty persists around trade policies and government spending, analysts will be watching March retail figures closely for signs of whether this cautious consumer behavior represents a temporary slowdown or the beginning of a more significant pullback.

Ava Sinclair

Ava is a financial analyst-turned-writer who translates complex economic trends into digestible insights. Whether it's Wall Street movements, market shifts, or personal finance strategies, Ava makes numbers make sense for everyone.

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