US February Retail Sales Miss Expectations, but Core Sales Indicate Resilient Consumer Spending

By TrendForce

2025-03-18

The U.S. retail sales growth slowed to 3.1% year-over-year in February (prior: 3.9%), while month-over-month rebounded to 0.2% (prior: -1.2%), according to U.S. Census Bureau on March 17 , falling short of market expectations of 0.6%.

Among the 13 major retail categories, six recorded growth, primarily driven by a 0.4% month-over-month increase in food and beverage sales (prior: 0.1%), a 2.4% rebound in online retail sales (prior: -2.4%), and a 1.7% rise in healthcare and medical spending (prior: -1.1%).

Conversely, durable goods-related sales, particularly in the automotive sector, continued to weaken, with annual growth slowing to 3.1% (prior: 5.7%) and monthly sales declining by 0.4% (prior: -3.7%). Electronic goods sales saw a steeper contraction, with annual growth dropping to -5.3% (prior: -0.5%) and monthly sales decreasing by -0.3% (prior: -1.1%).

Food services and drinking place, a key indicator of household financial conditions, also weakened further, growing just 1.5% year-over-year (prior: 4.1%) and declining 1.5% month-over-month (prior: 0.0%), marking the lowest level in a year.

This slowdown not only reflects the crowding-out effect from preemptive purchases in prior months due to tariff concerns but also suggests that consumer sentiment may be deteriorating amid ongoing uncertainty regarding future trade policies. Additionally, recent stock market weakness may have reduced disposable income, further restraining purchases of durable goods.

However, core retail sales, which exclude auto and gasoline sales, remained resilient, growing 3.5% year-over-year (prior: 3.6%) and rebounding 0.5% month-over-month (prior: -0.8%). Furthermore, the control group measure—excluding food services and building materials—showed even stronger growth, with annual gains reaching 4.4% (prior: 3.7%) and monthly growth accelerating to 1.0% (prior: -1.0%), indicating that overall consumption retains a degree of strength.

Overall, February retail sales presented mixed signals, with monthly growth once again falling short of expectations, suggesting a degree of cooling in consumer spending. However, following the weather-related weakness in January, spending on durable goods such as autos and electronics showed signs of stabilization, while core retail sales maintained strong momentum, indicating that a broad-based consumer slowdown has yet to materialize.

Following the data release, markets took note of the resilience in core retail sales, which signaled continued strength in U.S. consumer spending. Additionally, Federal Reserve Chair Jerome Powell’s recent remarks, in which he highlighted a robust labor market and ongoing progress toward the Fed’s 2% inflation target, helped alleviate recession concerns. Current market expectations suggest that the Fed will maintain its cautious stance, with total rate cuts projected at 50 bps for the year, likely to occur in June and September.

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