Due to growth at car dealerships and petrol stations, U.S. retail sales increased in February; nevertheless, as households struggle with inflation and rising borrowing costs, consumer spending is slowing down.

This month, retail sales increased by 0.6%, the Census Bureau of the Commerce Department announced on Thursday. Sales for January were down 1.1% as opposed to the 0.8% that had been previously reported, according to revised data. Retail sales, which consist primarily of products and are not inflation-adjusted, were predicted by economists surveyed by Reuters to increase by 0.8% in February.

Part of the reason for the January sales decline was the extremely cold weather and the challenge of correcting the statistics for seasonal variations. Now that those issues have mostly passed, sales are returning to a more typical trend.

In February, retail sales were flat, with the exception of cars, fuel, building supplies, and food services.

The core retail sales figure is the one that most closely aligns with the GDP’s consumer spending component. Core sales for January were altered from the previously reported 0.4% decrease to a 0.3% decrease.

After supporting economic growth in the October–December quarter, consumer expenditure is declining in the first quarter. However, a reasonably tight labour market continues to encourage spending. Experts see no impending recession.

The GDP is expected to grow in the first quarter at an annualised pace of 2.5%, according to the Atlanta Federal Reserve. In the fourth quarter, the economy expanded at a 3.2% annual rate.

Despite rising inflation, consumer expenditure is relatively steady as households reduce their discretionary spending and place a greater emphasis on necessities. Since March 2022, the Federal Reserve has increased interest rates by 525 basis points, bringing them to the current range of 5.25% to 5.50%. Rate cuts by the US Federal Reserve are anticipated by June.

A supplementary report released on Thursday by the Labour Department revealed that, for the week ending March 9, the number of first claims for state unemployment benefits decreased by 1,000 to a seasonally adjusted 209,000. 218,000 claims were anticipated by economists for the most recent week.

During the week ending March 2, the number of beneficiaries (a proxy for hiring) climbed by 17,000 to 1.811 million following an initial week of aid.

For both first and ongoing claims from 2019 through 2023, the government updated the statistics. In addition, it changed the seasonal parameters for both series from 2019 through 2023 and introduced new models to seasonally adjust initial and ongoing claims this year.

(Adapted from Reuters.com)