Consumer Spending Ticks Up Slightly Amid Inflation and Market Fears

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Consumer Spending Ticks Up Slightly Amid Inflation and Market Fears/ Newslooks/ WASHINGTON? J. Mansour/ Morning Edition/ Retail sales in the U.S. rose just 0.2% in February, marking a tepid rebound from a 1.2% drop in January. Consumers spent more at grocery stores and online retailers but cut back at auto dealers, restaurants, and electronics stores. Economic concerns—including market volatility, Trump’s tariff policies, and government spending cuts—have led to declining consumer confidence. While job growth remains steady, many shoppers, particularly lower-income consumers, are feeling the strain of inflation and financial uncertainty.

A shopper looks at clothes at a Kohl’s in Ramsey, N.J., Thursday, Oct. 10, 2024. (AP Photo/Seth Wenig)

U.S. Consumer Spending: Quick Looks

Retail Sales Up 0.2%: A slight recovery after January’s 1.2% drop.
Sector Performance: Gains in grocery, home improvement, and online shopping; declines in autos, restaurants, and electronics.
Economic Anxiety Grows: Market drops, Trump’s tariffs, and spending cuts are impacting confidence.
Consumer Sentiment Falls: Down 20% since December, with Republicans and Democrats both losing confidence in the economy.
Retailers Sound the Alarm: Walmart, Macy’s, and Dollar General warn that shoppers are spending cautiously.
Inflation Still Hurting Households: Many Americans can only afford essentials, with some cutting back on necessities.

Retail Sales Rise Slightly as U.S. Consumers Grapple with Economic Uncertainty: Deep Look

American shoppers increased their spending slightly in February, but the modest 0.2% rise in retail sales suggests that consumers are growing more cautious amid rising economic uncertainty. The data, released Monday by the Commerce Department, follows a 1.2% decline in January, one of the sharpest drops in recent months.

While grocery stores, home improvement retailers, and online businesses saw moderate gains, spending declined at auto dealerships, restaurants, and electronics stores, indicating that Americans are cutting back on discretionary purchases.

Consumer Confidence Takes a Hit

The University of Michigan’s Consumer Sentiment Index fell for the third straight month, dropping more than 20% since December.

Political Divide: Republican respondents remain more optimistic than Democrats, but even Republican confidence in the future economy fell by 10%.
Key Concerns: Shoppers cite market volatility, inflation, and uncertainty over Trump’s economic policies—including tariff threats and federal budget cuts—as reasons for their financial unease.

Sector Breakdown: Who’s Winning and Losing?

Some retailers benefited from consumers prioritizing necessities, while others suffered from reduced discretionary spending.

Sales Growth

Grocery Stores & Home Improvement Retailers – Consumers continued spending on food and home repairs.
Online Retailers – E-commerce saw steady gains as shoppers searched for better deals online.

Sales Declines

Auto Dealers & Electronics Stores – High-ticket purchases took a hit as financial uncertainty loomed.
Restaurants & Clothing Stores – Dining out and fashion spending declined, signaling belt-tightening.
Gas Stations – Sales dipped, though this was partly due to falling gas prices.

Excluding gas and auto sales, retail sales increased 0.5%, which is a healthier figure—but still modest compared to previous months.

Retail Giants Sound Economic Warning

Major retailers are raising alarms about consumer spending habits, particularly among lower-income shoppers.

Walmart, the nation’s largest retailer, cited economic uncertainty and tariff concerns in its weaker-than-expected forecast.
Macy’s reported that consumers are pulling back on discretionary spending, particularly in the middle-income bracket.
Dollar General CEO Todd Vasos painted a bleak picture for the low-income segment, saying:

“Our customers continue to report that their financial situation has worsened over the last year as they have been negatively impacted by ongoing inflation.”

According to Vasos, many Dollar General shoppers are struggling to afford basic essentials, with some even cutting back on necessities.

Jobs Holding Up, But for How Long?

Despite consumer uncertainty, the U.S. job market remains strong.

Hiring remains steady, and no major layoffs have been reported across key industries.
Economists argue that as long as Americans are employed, consumer spending should remain somewhat resilient.
However, if inflation pressures persist and financial concerns grow, spending could cool further in the coming months.

What’s Next?

While retail sales bounced back slightly in February, the sluggish growth suggests shoppers remain cautious. If economic concerns, inflation, and policy uncertainty continue, consumer spending could stall further, potentially slowing overall economic growth.

With retailers warning of weaker forecasts, all eyes will be on future spending trends to determine whether the U.S. economy is headed for a slowdown or just a temporary dip in confidence.