ARLINGTON, Va.—Total retail sales dipped 0.4% in February after a 3.2% surge in January and could be a signal to the Fed it’s time to slow the rate increases.
"While the decelerating momentum suggests some emergent consumer weakness, this modest contraction signals continued strength within goods consumption long-term, which has remained well-above expectations,” said NAFCU Economist Noah Yosif. “It further suggests household finances remain healthy, which should reassure the Federal Reserve as it prepares to reassess its timeline and terminal rate for the ongoing tightening cycle.”
Declines were widespread across sectors with department stores seeing the largest contraction of 4%, followed by furniture and home appliance stores (-2.5%), restaurants (-2.2%), and motor vehicle and parts dealers (-1.8%).
‘Sluggish Pace’
Year-over-year growth in retail sales were up 5.4% in February. Control group sales – which excludes auto, gas, and building material categories – were up 8.4% from a year ago, the data show.
“Overall, February’s readings indicate a sluggish pace of erosion from inflation, interest rates, and economic uncertainty on consumer finances, as well as a persistent, though shrinking, window of time for the ongoing tightening cycle to peak without overwhelming consumers and inducing an economic downturn,” said Yosif.
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