Consumers continued to spend at a slower-than-expected pace in February, according to a Commerce Department report released on Wednesday.
Pre-retail sales rose 0.3% MoM, slightly below the Dow Jones estimate of 0.4%. Excluding autos, sales rose 0.2%, well below the expected 0.9% growth and suggesting that consumer demand has slowed down after strong growth earlier in the year.
Spending data was well below price increases, which rose 0.8% in February, according to data from the Labor Department last week. Retail spending data is not adjusted for inflation.
The biggest dip in February figures came in online shopping, with out-of-store sales falling 3.7%.
One bright spot in Wednesday’s numbers is that January spending was revised up by 4.9%, a meteoric pace that was even stronger than the original estimate of 3.8%.
The two-month figures “suggest that real consumption growth remains fairly robust,” although some headwinds are starting to show, especially as interest rates are expected to rise from the Federal Reserve, said Andrew Hunter, senior US economist at Capital Economics.
“Given that real disposable incomes have already been falling since mid-2021 as previous fiscal support has been withdrawn and broader price increases have taken their toll, real consumption growth is likely to still slow in the coming months, especially when personal saving levels are already below their pre-pandemic levels. level,” Hunter wrote. “It’s possible that Fed tightening will hit spending on high-priced durable goods soon.”
Consumers, however, are still full of cash, ending 2021 with $1.4 trillion in savings, although the personal savings rate, last at 6.4%, has steadily declined during the pandemic era.
Demand for goods was extraordinary, not for services, and supply struggled to keep up. This contributed to a rise in inflation of 7.9% in 12 months, the fastest pace in more than 40 years.
Retail spending rose 17.6% year-on-year, according to the Commerce Department.
Soaring gas prices have greatly boosted that number, with gas station sales up 5.3% in February and 36.4% year-over-year. Gas station prices rose about 7% in February alone, according to the Energy Information Administration.
Bar and restaurant sales also showed strong month-on-month growth, up 2.5% and up 33% year-over-year. Shares in health and personal care stores fell 1.8%, furniture stores fell 1%, and sales of autos and parts rose 0.8%.