Retail spending experienced a slight decline in February, following concerns over tariffs and uncertain economic conditions.
Despite the month-over-month decrease, year-over-year figures continue to demonstrate growth, indicating that the economy remains fundamentally strong, according to the latest Retail Monitor report by the National Retail Federation (NRF).
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February sales show slight dip due to external factors
In February, total retail sales, excluding automobiles and gasoline, were down by 0.22% compared to the previous month, after being adjusted for seasonality.
However, the year-over-year figures revealed a positive increase of 3.38%. This is a slower growth rate compared to January’s 5.44% increase.
The NRF’s core retail sales, which exclude restaurants, automobiles, and gasoline, followed a similar trend, showing a 0.22% decrease in February, but up 4.11% year over year.
The NRF attributes the monthly dip to a mix of external factors, including harsh winter weather, a drop in consumer confidence linked to tariffs, and concerns surrounding inflation, rising unemployment, and policy uncertainty.
NRF President Matthew Shay noted that the value-conscious consumer is opting to spend less and save more, reflecting a cautious approach amid rising prices. However, the overall yearly gains suggest a resilient economy.
Online sales and health stores lead year-over-year growth
The year-over-year growth in retail sales was led by specific sectors, with online and non-store sales rising significantly.
These sales saw a 36.51% increase compared to February 2024. Health and personal care stores also showed strong year-over-year performance, up 8.33%. Meanwhile, general merchandise stores posted a 6.2% increase.
Despite the positive yearly figures, monthly figures were more subdued, with several sectors showing declines. Clothing and accessory stores, for example, recorded a 0.78% drop month-over-month, while grocery and beverage stores saw a slight decrease of 0.07%.
On the other hand, sporting goods and hobby stores showed resilience, with a 0.93% rise in February, compared to the previous month.
Tariffs and consumer sentiment dampen spending
The decline in February sales came on the heels of President Donald Trump’s announcement of new tariffs on goods from China, Mexico, and Canada, which took effect in February.
While tariffs on goods from Canada and Mexico were delayed, the tariffs on Chinese imports were increased to 20%, contributing to increased uncertainty.
Consumer sentiment, as measured by the University of Michigan’s Index, dropped to 64.7 in February from 71.7 in January, marking the second consecutive monthly decline.
Unlike other reports based on survey data, the Retail Monitor uses anonymized credit and debit card purchase data, offering a more accurate reflection of consumer spending habits. This real-time data provides a clearer picture of market trends without the need for revisions.
As retailers continue to navigate a fluctuating economy, the monthly figures from February indicate caution, though strong year-over-year sales point to ongoing growth in the retail sector.
