While holiday sales were solid, fashion brands started to wave the caution flag in February and the overall sales figures for the month — while not catastrophic — echoed their concerns.
February retail and food service sales inched up a seasonally adjusted 0.2 percent from January, well below the 0.7 percent increase economists forecast, according to FactSet. Against February 2024, sales were up 3.1 percent, with much of that coming from inflation of 2.8 percent over the past year.
Department store sales fell 1.7 percent in February from January and were down 3.9 percent from a year earlier. And apparel and accessories specialty stores were down 0.6 percent month-to-month and up 1 percent year-to-year.
The slower month seems to reflect not just the give and take after a stronger holiday run, but also a recalibration by consumers, who are reading the economic and political tea leaves now that President Donald Trump is back in office and shaking the foundations in Washington.
Jack Kleinhenz, chief economist at the National Retail Federation, said: “These results show that households are apprehensive and carefully navigating lingering inflation and turmoil related to changing economic policies. Regardless of the softer spending, consumer fundamentals remain healthy and intact so far, supported by low unemployment, steady income growth and other household finances.”
Trump has been wielding tariffs as a big stick, cracking down on China, Canada, Mexico and European countries as he seeks to realign global affairs.
He recently declined to rule out the possibility of a recession as he changes the nation’s economic approach.
And consumers are feeling it along with retailers.
The University of Michigan Surveys of Consumers recently found that consumer confidence has fallen by 22 percent since December, with a steep 11 percent decline in the March reading alone.
“While current economic conditions were little changed, expectations for the future deteriorated across multiple facets of the economy, including personal finances, labor markets, inflation, business conditions and stock markets,” said Joanne Hsu, director of the Surveys of Consumers, this month. “Many consumers cited the high level of uncertainty around policy and other economic factors; frequent gyrations in economic policies make it very difficult for consumers to plan for the future, regardless of one’s policy preferences. Consumers from all three political affiliations are in agreement that the outlook has weakened since February.”
Stephen Stanley, chief U.S. economist at Santander, already expected that retail sales would “slow noticeably” in the first half after gains in 2023 and 2024, but said February was softer than expected, although investors breathed a sigh of relief.
The Dow Jones Industrial Average was up 0.9 percent, or 382.64 points, to 41,870.83 in midday trading.
“In the context of recession fears that have been building in recent days, it appears that financial market participants were slightly encouraged by the results,” Stanley said. “I am not jumping on the recession bandwagon at this point, but I do expect a substantial cooling in the first quarter and second quarter for the consumer and, in turn, for real GDP.”
