US Retail Sales Rebound in February After Sharp Drop to Start 2025

Consumers spent at a slower pace last month amid ongoing economic concerns.

People shop on Black Friday at a mall in Hanover, Md., on Nov. 29, 2024. Madalina Vasiliu/The Epoch Times

Consumers returned to their spending ways at local retail stores and digital platforms in February following a sharp drop to kick off the new year.

According to the Department of Commerce, U.S. retail sales rose by 0.2 percent last month, up from a downwardly revised 1.2 percent decline in January.

This fell short of the consensus forecast of 0.6 percent.

Receipts at online retailers soared by 2.4 percent, followed by an increase in sales at health and personal care stores (1.7 percent) and food and beverage locations (0.4 percent).

Transactions at food services and drinking establishments dropped sharply by 1.5 percent, and sales at gasoline stations decreased by 1 percent.

The retail sales control group, which excludes non-core sectors such as building materials stores, car dealers, food services, and gasoline stations, surged at a higher-than-expected 1 percent. This is up from the downwardly adjusted 1 percent slide in January.

Market watchers pay attention to this metric because it contributes to calculations of gross domestic product.

Overall, in the 12 months ending February, retail sales inflation slowed to 3.1 percent from 3.9 percent.

Consumers Signaling the Worst

Market analysts initially dismissed the disappointing January numbers, blaming severe winter weather, California wildfires, and a post-holiday hangover for the decline.

Ted Rossman, senior industry analyst at Bankrate, said the February retail sales figures may continue to feed the growing narrative that economic growth prospects are under attack.

“Consumer confidence has taken a big hit in recent weeks, due mostly to concerns about tariffs on top of already elevated prices, and we’re seeing increasing evidence that consumers are pulling back,” Rossman told The Epoch Times.

A wave of recent surveys indicates that consumers have been expressing concerns about the high degree of uncertainty around public policy and other economic factors.

The March University of Michigan Consumer Sentiment Index plummeted to its lowest level since November 2022 and came in far below market estimates. Current economic conditions held steady, but expectations for the future, from labor markets to inflation, rapidly deteriorated.

The one-year inflation outlook climbed to a 29-month high of 4.9 percent, and the five-year horizon increased to 3.9 percent.

Similar trends were observed in The Conference Board’s Consumer Confidence Index and the RealClearMarkets/TIPP Economic Optimism Index.

“The bottom line is that consumer sentiment is deteriorating at an alarming rate,” Torsten Slok, Apollo’s chief economist, told The Epoch Times in a note.

Frequent twists and turns in policymaking can adversely affect consumers, making planning for the future more challenging for households.

Market Reaction

Investors ostensibly dismissed the lower-than-expected retail sales numbers as the leading benchmark averages were flat before the opening bell.

The New York Stock Exchange stands on Wall Street in New York City, on March 5, 2025. Spencer Platt/Getty Images

U.S. Treasury yields, which have been highly volatile this month, were also little changed.

Financial markets have been rocked in March, wiping out trillions of dollars in value.

Traders have panicked over President Donald Trump’s tariff plans and increasing worries that the United States could slip into a recession.

Wall Street typically views trade levies as a negative since companies either eat the added costs of higher import duties or pass them on to consumers in the form of higher prices, Cullen Roche, chief investment officer and founder of Discipline Funds, said.

“The problem today is U.S. consumers are pulling back and firms aren’t ready to invest in a new supply chain,” Roche said in a note. “So firms want to pass on the cost to consumers, but consumers are looking like they’re not having it.”

During the initial round of tariffs in Trump’s first term, many businesses chose to absorb the extra costs rather than raise their prices. This was seen in the divergence between the Consumer Price Index and the Producer Price Index—a measure of prices paid for goods and services by businesses—in 2018 and 2019.

Are conditions different this time?

The Organisation for Economic Co-operation and Development (OECD) is ringing alarm bells, stating that growth will slow and prices will rise if Trump’s trade actions persist.

“If the announced trade policy actions persist, as assumed in the projections, the new bilateral tariff rates will raise revenues for the governments imposing them, but will be a drag on global activity, incomes, and regular tax revenues,” the OECD stated in a March 17 report. “They also add to trade costs, raising the price of covered imported final goods for consumers and intermediate inputs for businesses.”

David Mericle, chief U.S. economist at Goldman Sachs, said tariffs will likely result in a one-time change to the price level instead of a significant shift in the pace of inflation.

In a recent episode of the “Goldman Sachs Exchanges” podcast, he said inflation expectations may require a more attentive focus.

“It is, I think, a little bit of surprise relative to what I might’ve expected several months back, just how focused businesses and consumers are on tariffs,” Mericle said. “I would say, at the very least, this is something to keep an eye on—the risk of the tariffs sparking broader price increases.”

Treasury Secretary Scott Bessent has suggested that tariffs could trigger a one-time price adjustment, although he has said he is unconcerned about inflation “across the continuum.”