Americans increased spending tepidly last month as anxiety over the
economy takes hold
[March 18, 2025] By
CHRISTOPHER RUGABER and ANNE D'INNOCENZIO
WASHINGTON (AP) — U.S. shoppers stepped up their spending just a bit in
February after a sharp pullback the previous month, signaling that
Americans are shopping more cautiously as concerns about the direction
of the economy mount.
Retail sales rose just 0.2% in February, a small rebound after a sharp
drop of 1.2% in January, the Commerce Department said Monday. Sales rose
at grocery stores, home and garden stores, and online retailers. Sales
fell at auto dealers, restaurants, and electronics stores.
The small increase suggests Americans may be growing more wary about
spending as the stock market has plunged and President Donald Trump's
tariff threats and government spending cuts have led to widespread
uncertainty among consumers and businesses.
Some economists were relieved the numbers weren’t worse. Still, many
expect consumer spending will grow just 1% to 1.5% at an annual rate in
the first three months of this year, far below the 4.2% gain in the
final quarter last year.
“Consumer spending is on track to slow sharply this quarter, but not by
as much as we previously feared,” Stephen Brown, an economist at Capital
Economics, a consulting firm, said in an email.
On Friday, a measure of consumer sentiment fell sharply for the third
straight month and is now down more than 20% since December. Respondents
to the University of Michigan's survey cited policy uncertainty as a
leading reason for the gloomier outlook. While the respondents were
divided sharply by party — sentiment about the current economy fell
among Republican by much less than for Democrats — Republicans'
confidence in the economy's future dropped 10%.
Consumers from all income levels are feeling more strained.
Hunter Simmons of Austin, Texas, who is a lawyer and journalist, said
that the uncertainty around the economy because of the stock market
turmoil and tariffs has made him more cautious about spending. He said
he used to buy the more expensive farm fresh eggs, but now he’s going
for the cheapest eggs he can find. He’s also been buying fewer fresh
vegetables and fruits and has turned to frozen versions. And lately
Simmons started to pay for gas in cash and is joining fuel rewards
programs.
“I am not a big spender in general, but I have been cutting back in
small ways,” he said.
A slew of earnings reports over the past few weeks from major retailers
including Walmart, Macy’s and Dollar General have cited a slowdown in
spending.
Walmart, the nation’s largest retailer and a bellwether for the retail
sector, released a weak outlook last month citing uncertainty around
tariffs.
February sales also fell last month at gas stations, clothing stores,
and sporting goods stores. The figures aren't adjusted for prices, and
the cost of gas also declined in February, which likely accounts for
most of the drop. Excluding gas and autos, retail sales rose 0.5%, a
healthier figure but still modest after a plunge of 0.8% in January.
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A shopper passes by a display of large-screen televisions in a
Costco warehouse Monday, Feb. 3, 2025, in east Denver. (AP
Photo/David Zalubowski)
 Also Monday, the National
Association of Homebuilders said its index measuring builder
sentiment fell three points to 39, the lowest level in seven months,
as economic uncertainty dimmed builders' outlook and fewer potential
buyers visited homes.
“Economic uncertainty, the threat of tariffs and elevated
construction costs pushed builder sentiment down in March,” the
group said. The homebuilders estimate tariffs will add $9,200 to the
cost of a new home.
Macy’s says its customers, even at its upscale chains Bluemercury
and Bloomingdale’s, are feeling angst and its financial outlook this
month reflects that.
“I think the affluent customer that’s shopping Macy’s is just as
uncertain and as confused and concerned by what’s transpiring,”
Macy’s CEO Tony Spring said at the time.
Hiring has mostly held up and there are no signs that companies are
laying off workers. As long as Americans have jobs, spending could
remain resilient. But that is not assured.
Dollar General CEO Todd Vasos said Thursday that the overall
economic picture for his customers is not ideal and the company said
it would close around 100 stores.
“Our customers continue to report that their financial situation has
worsened over the last year as they have been negatively impacted by
ongoing inflation ” Vasos said during an earnings call. “Many of our
customers report that they only have enough money for basic
essentials, with some noting that they have had to sacrifice even on
the necessities.”
Spending patterns at Costco have changed to accommodate a soured
view of the economy, including a shift toward ground beef and
poultry instead of more expensive cuts of meat, said to Gary
Millership, the company’s chief financial officer.
American Eagle Outfitters CEO Jay Schottenstein said angst is
particularly high among younger customers.
“Not just tariffs, not just inflation," said Schottenstein. "We see
the government cutting people off. They don’t know how that’s going
to affect them. And when people don’t know what they don’t know –
they get very conservative.”
The retail sales report mostly just covers goods purchases — as well
as restaurant sales — but there are signs Americans are cutting back
spending on services as well.
Airline executives at JP Morgan's airline industry conference last
week said bookings have fallen.
“There was something going on with economic sentiment, something
going on with consumer confidence," said Delta CEO Ed Bastian at the
industry conference.
___
D'Innocenzio reported from New York.
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