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U.S. retail sales in February edged up by 0.2% as consumers pulled back on discretionary spending, signaling cautious optimism amid a broader economic backdrop marked by tariffs and federal workforce cuts.
The Commerce Department’s Census Bureau report on Monday painted a mixed picture: while overall retail activity improved slightly, spending at restaurants and bars fell, reflecting more guarded consumer behavior.
"This report should alleviate concerns that the economy already is shrinking," said Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics. However, he warned that the risk of much weaker growth remains elevated, as consumers might seek to rebuild their savings in response to uncertainties over job security.
The report indicated that retail sales, which largely reflect goods and are not adjusted for inflation, rose by 0.2% in February. This modest rebound followed a downwardly revised 1.2% decline in January—a period marked by robust fourth-quarter gains and weather disruptions including winter storms and wildfires in California. Year-on-year, sales increased by 3.1%, bolstered by a 2.4% jump in online store receipts and a 1.7% rise at health and personal care outlets.
However, the gains were not uniform across sectors. Sales at building material and garden equipment suppliers increased by 0.2%, while auto dealership receipts fell 0.4% after a steep 3.7% drop in January. Furniture store sales remained flat, clothing store receipts dipped 0.6%, and electronic retailers saw a 0.3% decline. The services segment fared worse; food services and drinking places registered a 1.5% drop, and lower gasoline prices contributed to a 1.0% decrease in sales at service stations.
Discretionary spending appears to be softening. Bank of America card data for the Washington, D.C. metropolitan area—encompassing parts of Maryland and Virginia—showed early signs of reduced spending at restaurants. With consumer sentiment sinking to a near 2-1/2-year low in March, many analysts expect that consumer spending could weaken further in the coming months.
Economic headwinds also loom from President Donald Trump’s tariffs, which have sparked a trade war, and from mass layoffs of public workers as the Trump administration pursues a campaign to shrink the federal workforce. Retailers such as Kohl's, Macy's, Walmart, and Target have already tempered their sales expectations amid mounting inflation and recession fears.
On the monetary policy front, U.S. Treasury yields rose while the dollar slipped against a basket of currencies. Federal Reserve officials, meeting later this week, are expected to keep the overnight interest rate in the 4.25%-4.50% range. The Fed has trimmed rates by 100 basis points since September, and financial markets anticipate that the central bank may resume cutting borrowing costs in June, following a pause in its easing cycle that began in January.
Looking at the core retail segment—excluding volatile categories such as automobiles, gasoline, building materials, and food services—sales rose by 1.0% in February after a revised 1.0% decline in January. These core sales are closely linked to consumer spending in gross domestic product calculations, and economists had forecast a rebound of 0.3% following a previously reported 0.8% drop in January. Despite the modest gains, expectations are that consumer spending will slow significantly in the first quarter compared to the robust 4.2% annualized growth observed in the fourth quarter, when the economy expanded at a 2.3% pace.
The Atlanta Federal Reserve forecasts GDP could contract by 2.4% this quarter, although most economists are converging on a growth rate of around 1.2%. As the economy navigates these challenges, the underlying trend in retail sales appears firm, even as cautious consumers adjust their spending in response to an uncertain economic landscape.
At least 69 people have died and almost 150 injured following a powerful 6.9-magnitude earthquake off the coast of Cebu City in the central Visayas region of the Philippines, officials said, making it one of the country’s deadliest disasters this year.
A tsunami threat was issued in Chile after a magnitude 7.8 earthquake struck the Drake Passage on Friday. The epicenter was located 135 miles south of Puerto Williams on the north coast of Navarino Island.
The war in Ukraine has reached a strategic impasse, and it seems that the conflict will not be solved by military means. This creates a path toward one of two alternatives: either a “frozen” phase that can last indefinitely or a quest for a durable political regulation.
A shooting in Nice, southeastern France, left two people dead and five injured on Friday, authorities said.
Snapchat will start charging users who store more than 5GB of photos and videos in its Memories feature, prompting backlash from long-time users.
King Charles III visited the scene of Manchester synagogue attack on Monday where he met with and spoke to eye witnesses of the incident.
British soldiers will soon have the authority to shoot down drones threatening UK military bases under new powers set to be unveiled by Defence Secretary John Healey.
China’s economy grew 4.8% year-on-year in the third quarter, as official data showed the country remains on course to meet its annual growth target of around 5%.
Australian PM Anthony Albanese meets U.S. President Donald Trump on Monday to seek greater U.S. investment in Australia’s critical minerals sector amid China’s tightening control.
Ukraine is preparing a contract to buy 25 Patriot air defence systems, President Volodymyr Zelenskyy said, in what would be a huge boost to Kyiv's abilities to defend against Russia's aerial bombardments.
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