Christopher Lugerber and Anne Die Inogeo, AP Business Writer
WASHINGTON (AP) — US shoppers have stepped up their spending a bit in February after a sharp pullback the previous month, indicating that Americans are shopping more carefully as concerns about the direction of the economy mount.
The Commerce Department said on Monday that retail sales rose just 0.2% in February and rose with a slight rebound after a sharp drop of 1.2% in January. Sales rose in grocery stores, home and garden stores and online retailers. Sales at car dealers, restaurants and electronic stores have declined.
The slight increase suggests that Americans may be stronger about spending as stock markets plummeted, and President Donald Trump’s tariff threat and government spending cuts have led to widespread uncertainty between consumers and businesses.
Some economists have reassured that numbers have not deteriorated. Still, many expect consumer spending to increase by just 1% to 1.5% annually in the first three months of the year. That’s well below 4.2% in last quarter.
“Consumer spending is on track to slow this quarter sharply, but not as much as we’ve been afraid before,” said Stephen Brown, an economist at consulting firm Capital Economics.
On Friday, the third consecutive month of consumer sentiment measures fell sharply, falling more than 20% since December. Respondents to the University of Michigan survey cited policy uncertainty as a key reason for the pessimistic outlook. Respondents were sharply divided by the party – sentiment about the current economy fell among far fewer Republicans than Democrats – Republican confidence in the future in the economy fell by 10%.
Consumers at all income levels feel more tense, according to many revenue reports over the past few weeks from major retailers such as Walmart, Macy’s and General Dollar.
Walmart, the nation’s largest retailer and pioneer in the retail sector, released a weak outlook last month, citing uncertainty around tariffs.
Sales in February also fell at gas stations, clothing stores and sports goods stores last month. The numbers aren’t adjusted to price, and gas costs also fell in February, accounting for most of the decline. Excluding gas and automobiles, retail sales increased by 0.5%. This is a healthy figure, but remains modest even after the 0.8% entry in January.
Also on Monday, the National Housing Builder Association said its index measurement builder sentiment fell three points to 39, dropping to its lowest level in seven months as economic uncertainty blew the builder’s outlook and potential buyers visited the home.
“Economic uncertainty, tariff threats and rising construction costs have led to a decline in builder sentiment in March,” the group said. Home builders estimate that the tariffs will add $9,200 to the cost of the new home.
Macy’s says its customers are worried about Bluemercury and Bloomingdale’s customers, even at its luxury chain, and this month’s financial outlook reflects that.
“I think the wealthy customers who are shopping Macy’s are confused and worried about what’s going on,” Macy’s CEO Tony Spring said at the time.
Employment has been largely postponed and there are no indications that companies are firing workers. As long as Americans have jobs, spending could remain resilient. But that is not guaranteed.
Dollar General CEO Todd Vasos said Thursday that the overall economic situation for its customers is not ideal and the company will close around 100 stores.
“Our customers continue to report that their financial situation has deteriorated last year due to negative impacts from ongoing inflation,” Vasos said in a revenue call. “Many of our customers report that they only have enough money for basic essentials, and some point out that even essentials had to sacrifice.”
The spending pattern at Costco has changed to accommodate the sour landscape of the economy, such as the shift to ground beef and poultry, as mentioned by the company’s chief financial officer Gary Millership.
Jay Schottenstein, CEO of American Eagle trinkets, said Angst is particularly high among younger customers.
“It’s not just tariffs, it’s not just inflation,” Schottenstein said. “We see the government cut off people. They don’t know how it affects them. And when people don’t know what they don’t know – they become very conservative.”
Retail sales reports not only cover primarily product purchases and restaurant sales, but there are signs that Americans are cutting spending on services.
An airline executive at JP Morgan’s Aviation Industry Conference last week said the bookings had been made.
“There was something going on with economic emotions. Something is going on with the confidence of the consumer,” Delta CEO Ed Bastian said at an industry conference.
d’Hynenzio was reported from New York.
Original issue: March 17, 2025, 8:49am EDT
