February Saw Increased Shopper Spending

February saw increased shopper spending, before gasoline prices increased due to the attacks on Iran, reported The Associated Press.

Retail sales rose a better-than-expected 0.6% in February, from a revised 0.1% decline in January, the Commerce Department reported last week. “Retail analysts say it was a strong showing given that inflation has rattled American households, but that the war in Iran may have dented the psyche of consumers with spending on gasoline racing higher over the past five weeks,” the outlet wrote.

Research showed that business at clothing and accessories stores rose 2%, while sales at electronics and appliance stores were up 0.5%. Business at health and personal care stores were up 2.3%. AP highlighted that the snapshot offers only a partial look at consumer spending.

“While the overall numbers are good and suggest a continued trajectory of reasonable expansion for retail, they do not reflect the problems that have arisen since the start of the Iran conflict,” said Neil Saunders, managing director of GlobalData. “Since the start of March our own numbers show that consumer sentiment has soured and that rising gas prices are starting to spook consumers.”

The Associated Press said that economists had originally believed that an unusually large jump in tax refunds would kick start spending at the start of the year, but that rising gas prices will take some of that money.

“This was a solid report,” Ksenia Bushmeneva, economist at TD Bank Group, wrote in a report published last week. He noted that higher gas prices at the pump will likely lift overall sales in March since the government retail sales figures are not adjusted for inflation. But he said, “real spending might take a hit as consumers look to offset higher fuel costs with reduced spending on discretionary items, with spending on travel and recreation the most likely areas to be cut.”

NACS has been keeping a close eye on rising gas prices. Read about the impact of the war on prices here.