Retail sales for building materials and gardening equipment rebounded in February after falling substantially the previous month, data from the U.S. Census Bureau showed, in what could be a signal that Americans are getting ready for the warmer seasons and setting their homes.
Building material and gardening equipment sales went up by 2.2 percent last month to $34 billion compared to a decline of 4.3 percent in January. The improvement of sales in the sector helped to drive up overall retail sales that were only marginally up by 0.6 percent for the month to $700 billion, the data showed.
Also helping to drive up sales in the month was spending in auto sales, which shot up by 1.6 percent in February, a much-improved performance from the more than 2 percent decline seen the prior month. Electronic sales also did well, rising by 1.5 percent for the month.
For the month, the American consumer drove a rebound in retail sales, even as the numbers came in slightly more disappointing than expected. Bloomberg economists had forecast a 0.8 percent increase from the 1.1 drop in January.
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“Consumers remained cautious in February,” Gregory Daco, EY chief economist, said in a note shared with Newsweek. “The February rebound was driven by building materials and autos after a weather-disrupted January.”
Economists suggested that atypical weather patterns may have shaped how retail sales shook out for the month.
“Weather seems to have been a factor impacting the performance of certain categories,” said Ken Kim, KPMG’s senior economist. “In parts of the country, spring arrived early. For example, Chicago experienced balmy temperatures of 60 degrees and notched the warmest February on record.”
That helped power the spending in the building materials segment to its highest increase in two years, he added.
On the other hand, warmer weather meant that people needed fewer winter clothes, helping to push down sales on apparel by 0.5 percent for the month.
“Winter gear fell out of favor,” Kim said. “Inventories of winter clothing are likely to pile up and eventually find their way to discount racks.”
Auto sales were up on the back of companies working hard to attract buyers through incentives, he added.
“Automakers are increasingly relying on incentives to move product,” Kim said, adding that auto insurance has risen by 20 percent for the last few months. “Affordability has become an issue given the high level of prices, rising insurance costs and high financing rates.”
In other retail segments, online sales continued to soften, dropping by 0.1 percent after falling the previous month as well, government data showed. But Americans appeared still willing to go to restaurants as sales jumped 0.4 percent.
“Consumers may be exhibiting fatigue in purchasing goods,” Kim said. “Such evidence comes from goods prices which have been deflating. In contrast, sales at eating and drinking establishments rose.”
Overall, there are indications that Americans were cooling on the retail spending.
“The modest rebound in retail sales in February suggests that consumer spending growth slowed in early 2024,” said Michael Pearce, deputy chief U.S. economist at Oxford Economics. “Accounting for inflation, we think real consumption growth was flat in February.”
The outlook for the year is that consumption may cool to about 2 percent growth in the first quarter, slightly weaker than Oxford Economics’ initial forecast of 2.4 percent and end the year up 3 percent.
“We expect consumption growth to remain close to that pace over the rest of the year as solid labor market conditions keep real disposable income growth strong, and the resilience of households’ balance sheets means the saving rate rises only modestly,” Pearce said.
Uncommon Knowledge
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Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
