Retail sales soften in February after a big January increase

Sales at U.S. retailers slowed sharply in February, rising a scant 0.3%, which was primarily offset by the upward revision in January’s gains from 3.8% to 4.9%.  However, taken together, the average increase in retail sales in the first two months of 2022 suggest the new year has gotten off to a decent start.

February sales were helped by a price-related 5.3% month-over-month rise in gasoline station sales and, despite the reported drop back in manufacturers’ unit sales, motor vehicle sales increased by 0.8%.  In addition, the 2.5% month-over-month rebound in food and drink services sales reflects the unwinding of the earlier Omicron-related disruption.  

However, more of the increase is being driven by inflation and there is evidence that some shoppers are starting to change their habits in terms of where they shop.  If inflation persists, retail could become more squeezed, especially as it comes up against tougher prior year numbers in March and beyond.