US Retail Sales Decelerate As Gas Prices Surge

US retail sales rose 0.3% in February, data out Wednesday showed, an underwhelming performance that could exacerbate fears of an economic slowdown even as it may allay jitters around an overzealous Fed tightening cycle.

The range of estimates, from nearly six-dozen economists, was -0.7% to 1.9%. A sharp upward revision to January’s already robust gain was welcome, but likely insufficient to offset an otherwise lackluster read on the consumer (figure below).

There’s palpable concern about the extent to which surging prices will weigh on consumption, as Americans are compelled to divert more of their income to gas and food, leaving less (if any) for discretionary spending.

As a reminder, the figures aren’t adjusted for price changes.

More concerning than the headline print were what looked like woeful misses on both the ex-autos and control group figures. The former rose just 0.2% against expectations for a 0.9% gain, while the latter dropped 1.2% versus an expected 0.3% advance.

Again, though, revisions may help cushion the blow. January’s control group print was revised to show a 6.7% gain.

A quick look under the proverbial hood revealed the expected sharp uptick in spending at gas stations (figure below), and a considerable decline in non-store retailer expenditures.

Spending at restaurants and bars rebounded, likely due to the abatement of Omicron cases and the relaxation of related restrictions.

Coming as it did just hours ahead of the March Fed decision, the figures weren’t sufficient to change any minds, but considering the likelihood of additional prices pressures associated with the conflict in eastern Europe, the deceleration in spending (and particularly the negative control group print) didn’t bode especially well for an economy at a crossroads.

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One thought on “US Retail Sales Decelerate As Gas Prices Surge

  1. I don’t the defeatist tone. We want the US consumer to stop spending so that we don’t have persistent inflation and an aggressive Fed hike cycle!

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