US Retail Sales Miss Expectations—Another Warning Sign for Economy

Retail sales in the U.S. rose just 0.2% in February, far below the 0.7% economists had projected. This follows a 1.2% decline in January, painting an unsettling picture of a consumer slowdown. With retail spending making up nearly one-third of the economy, this isn’t a stat to ignore.

A Market Looking for Reassurance Didn’t Get It

Investors were hoping that strong consumer spending would signal stability in a turbulent economy. Instead, sales dropped the most at:

Department stores (-1.7%)
Restaurants and bars (-1.5%)
Gas stations (-1%)

However, online shopping (+2.4%) and health stores (+1.7%) posted gains, showing that spending isn’t vanishing—it’s shifting.

The retail “control group,” which excludes volatile categories like gas and auto sales, rose 1%, recovering from January’s 1% drop and beating the expected 0.4% gain—a small silver lining in an otherwise cloudy picture.

Retail CEOs Sound the Alarm

Retail executives aren’t mincing words: Consumers are tightening their wallets.

🔹 Dollar General ($DG) CEO Todd Vasos: “Many of our customers report they only have enough money for basic essentials, with some noting they’ve had to sacrifice even on necessities.”

🔹 Walmart ($WMT) CFO John David Rainey: The company expects sales and profit growth to slow in 2025 due to “uncertainties related to consumer behavior and global economic and geopolitical conditions.”

🔹 Best Buy ($BBY) CEO Corie Barry: “We’ve never seen this kind of breadth of tariffs… price increases for American consumers are highly likely.”

Meanwhile, Trump’s tariffs on Mexico and Canada are adding even more uncertainty. On March 4, he announced 25% tariffs, only to delay them again after business leaders pushed back. But Target ($TGT) CEO Brian Cornell warned that if they do go through, shoppers will see higher prices within days.

Is Stagflation Around the Corner?

With slowing growth, shaky consumer sentiment, and rising inflation risks due to tariffs, economists warn the U.S. could be trending toward “stagflation”—where growth slows while inflation picks up.

🔸 The OECD (Organisation for Economic Co-operation and Development) issued a stark warning this week, stating that Trump’s trade policies are dragging down global activity, incomes, and tax revenues.

🔸 The Fed ($SPX) is now in a tough spot. After cutting rates three times last year, markets expect the central bank to hold steady this week. But with weak retail sales and tariff-fueled inflation risks, the path forward for interest rates is far from clear.

Bottom Line

Weak consumer spending is flashing warning signs for the economy. Retailers are feeling the squeeze, and Trump’s unpredictable trade policies aren’t helping. If the U.S. consumer starts pulling back further, the broader economy could feel it fast.

For now, all eyes are on the next round of earnings and the Fed’s next move.

Disclosure: This article does not represent investment advice. The content and materials featured on this page are for educational purposes only.

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