By Lucia Mutikani
WASHINGTON (Reuters) -U.S. retail sales rebounded marginally in February as consumers pulled back on discretionary spending, reinforcing the growing uncertainty over the economy against the backdrop of tariffs and mass firings of federal government workers.
Nonetheless, the report from the Commerce Department on Monday suggested that the economy continued to grow in the first quarter, though at a moderate pace. It sketched a picture of a cautious consumer, with sales at restaurants and bars declining by the most in 13 months amid deteriorating sentiment.
“This report should alleviate concerns that the economy already is shrinking,” said Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics. “But the risk of much weaker growth, as consumers seek to rebuild a savings buffer in response to concerns about job security, now looks elevated.”
Retail sales rose 0.2% last month after a downwardly revised 1.2% decline in January, which was the biggest drop since November 2022, the Commerce Department’s Census Bureau said.
Economists polled by Reuters had forecast retail sales, which are mostly goods and are not adjusted for inflation, advancing 0.6% after a previously reported 0.9% drop in January.
That decline followed hefty gains in the fourth quarter and winter storms in many parts of the country in January as well as wildfires in California.
Sales increased 3.1% year-on-year in February. Monthly sales were lifted by a 2.4% surge in receipts from online stores. Sales at health and personal care stores jumped 1.7%. Sales at building material and garden equipment suppliers gained 0.2%.
But receipts at auto dealerships fell 0.4% after dropping 3.7% in January. Furniture store sales were unchanged while receipts at clothing stores fell 0.6% and those at electronic retailers dropped 0.3%.
Receipts at food services and drinking places, the only services component in the report, declined 1.5%. That was the largest drop since January 2024 and followed an unchanged reading in January.
Economists view dining out as a key indicator of household finances. Some believed cold weather could have kept people at home. Lower gasoline prices helped to lower the value of sales at service stations by 1.0%. Sporting goods, hobby, musical instrument and bookstore sales fell 0.4%.
Stocks on Wall Street were higher. The dollar eased against a basket of currencies. Longer-dated U.S. Treasury yields slipped while shorter-dated ones rose.
With consumer sentiment sinking to a near 2-1/2-year low in March, sales could struggle in the months ahead.
