Washington
CNN
—
Spending at US retailers last month was much weaker than expected, in a troubling sign that the American shopper could be starting to tap out.
Retail sales rose 0.2% in February from the prior month, the Commerce Department said Monday, up from January’s downwardly revised 1.2% decline. That was much lower than the 0.7% increase economists projected in a FactSet poll. The figures are adjusted for seasonal swings but not inflation.
President Donald Trump’s whipsawing trade spat with America’s biggest trading partners has spurred high levels of uncertainty among consumers and businesses. That skittishness has been evident across many consumer surveys and now shoppers seem to be adjusting their purchasing behavior accordingly. Retail sales account for about a third of overall spending in the US.
Weak consumer spending figures are adding to concerns that the US economy is slowing, and perhaps heading into a recession. Monday’s retail report didn’t ease those fears.
Spending last month declined the most at department stores (-1.7%), restaurants and bars (-1.5%) and at gasoline stations (-1%). Meanwhile, sales were up online and at health stores, rising 2.4% and 1.7%, respectively.
Excluding sales at gas stations and car dealerships, retail sales were up 0.5% in February from the prior month.
Retailers are sounding the alarm
Executives at America’s retail stores have recently warned of consumers feeling stretched and becoming cautious of their spending. Some stores have said they will need to raise prices if Trump’s trade war spirals out of control.
“Our customers continue to report that their financial situation has worsened over the last year as they have been negatively impacted by ongoing inflation,” Todd Vasos, chief executive of Dollar General, said last week in an an earnings call. “Many of our customers report they only have enough money for basic essentials, with some noting that they have had to sacrifice even on the necessities.”
Meanwhile, Walmart, America’s biggest retailer, expects sales and profit to slow this year. John David Rainey, the company’s finance chief, in an earnings call last month pointed to “uncertainties related to consumer behavior and global economic and geopolitical conditions.”
In addition to the health of the US consumer, retail executives also weighed in on how Trump’s tariffs could affect operations.
“We’ve never seen this kind of breadth of tariffs. This, of course, impacts the whole industry,” Best Buy CEO Corie Barry said on a call with analysts earlier this month. The company expects its vendors to pass along some tariff costs to retailers “making price increases for American consumers highly likely.”
On March 4, Trump imposed 25% tariffs on Mexico and Canada — then delayed those duties again after complaints from business leaders. That same day, Target CEO Brian Cornell told CNBC that Trump’s tariffs could quickly result in higher prices within days for fruits and vegetables imported from Mexico, adding that the tariff uncertainty could also hamper the company’s profits.
This story is developing and will be updated.