Retail sales come up short in February as inflation slows consumer spending

According to a Commerce Department report, consumers continued to spend in February at a slower pace than expected.

The growth of retail sales was slightly below the estimate. After a rapid pace to start the year, consumers were slowing down and sales were up just 2% without autos.

Labor Department data released last week shows that the spending numbers were below the rise in prices. Retail spending numbers are not adjusted for inflation.

In February, online shopping was the biggest factor in the decrease in nonstore sales.

January spending was revised up to an increase of 4.9%, which was even stronger than the initial estimate of 3.8%, and was one bright spot in the data released Wednesday.

Andrew Hunter, senior U.S. economist at Capital Economics, said that the two-month numbers suggest that real consumption growth remains solid.

Real disposable incomes have been falling since mid-2021, as earlier fiscal support was withdrawn, and the more general surge in prices took its toll, so real consumption growth is likely to slow over the coming months.

The personal savings rate has been coming down steadily during the Covid pandemic era, but consumers still have over a trillion dollars in savings.

Supply has struggled to keep up with demand. Inflation ran at a 7.9% rate on a 12-month basis, the fastest pace in more than 40 years.

The Commerce Department said that retail spending was up in the past year.

Sales at gasoline stations increased in February and a year ago due to the surge in gas prices. According to the Energy Information Administration, the prices at the pump went up in February.

For the month, bar and restaurant sales were up 2.5%, which was good for a 33% year-over-year increase. Health and personal-care stores saw a decline, while furniture and motor vehicle and parts dealers were down.