Consumers continued to spend in February through at a slower pace than expected, according to a Commerce Department report Wednesday.
Advance retail sales grew 0.3% for the month, slightly below the 0.4% Dow Jones estimate. Stripping out autos, sales were up 0.2%, well below expectations for a 0.9% increase and indicative that after a rapid pace to start the year, consumers were slowing down.
The spending numbers were well below the rise in prices, which increased 0.8% in February, according to Labor Department data released last week. Retail spending numbers are not adjusted for inflation.
The biggest dent in February’s numbers came in online shopping, with nonstore sales down 3.7%.
One bright spot in the numbers released Wednesday is that January spending was revised up to an increase of 4.9%, a blistering pace that was even stronger than the initial estimate of 3.8%.
The two-month numbers “suggest that real consumption growth remains reasonably solid” though some headwinds are beginning to show, particularly from expected interest rate increases coming from the Federal Reserve, said Andrew Hunter, senior U.S. economist at Capital Economics.
“With real disposable incomes having already been falling since mid-2021, as earlier fiscal support was withdrawn, and the more general surge in prices took its toll, real consumption growth still looks likely to slow over the coming months, particularly when the personal savings rate is already below its pre-pandemic level,” Hunter wrote. “It also may not be long before Fed tightening starts to hit spending on big-ticket durables.”
Consumers, however, remain flush with cash, finishing 2021 with $1.4 trillion in savings though the personal saving rate, most recently at 6.4%, has been coming down steadily during the pandemic era.
Demand has been extraordinary for goods over services, and supply has struggled to keep up. That has fueled inflation running at a 7.9% rate on a 12-month basis, the fastest pace in more than 40 years.
On a year-over-year basis, retail spending was up 17.6%, the Commerce Department said.
The meteoric surge in gas prices has pushed that number to a large degree, with sales at gas stations up 5.3% in February and 36.4% from a year ago. Prices at the pump rose about 7% in February alone, according to the Energy Information Administration.
Bar and restaurant sales also showed strong gains for the month, up 2.5% and good for a 33% year-over-year increase. Health and personal care stores saw a 1.8% decline while furniture stores were off 1% and motor vehicles and parts dealers rose 0.8%.
For all the latest Technology News Click Here
