Americans shopped less in February, leading retail sales to fall 3% on a seasonally adjusted basis, the Census Bureau reported Tuesday.
It was a much steeper drop than the 0.5% decline economists had predicted, according to Refinitiv.
Bad weather across many states were part of the reason sales declined last month.
But the data is particularly disappointing because it follows a revised 7.6% January increase that came on the heels of three straight months of contractions.
Last month, sales at department stores declined 8.4% from the month prior. Sporting goods stores sales dropped 7.5%, and furniture and home furnishings sales declined 3.8%. People even shopped less online: Sales at online retailers fell 5.4%.
“These statistics indicate the continued fragility of our economic recovery,” Ted Rossman, senior industry analyst at Bankrate.com, said in a note to clients Tuesday.
That said, better times are likely ahead for the retail sector: Since the start of the month, Washington has passed a $1.9 trillion stimulus package including another round of direct stimulus checks to qualifying individuals and extended jobless aid. President Joe Biden signed the package into law last week. With this boost, Americans will likely spend more in the near term. The ailing economic recovery sure could use the lift, as some two-thirds of the US economy runs on consumer spending.
The stimulus package will drive spending at retailers in the coming months, say analysts. Walmart (WMT), Dollar General (DG) and other discount chains are expected to be the main beneficiaries of customers using their stimulus dollars, said Scott Mushkin, chief executive of retail consulting and research firm R5 Capital.
People may also use their stimulus checks to buy products they weren’t able to afford previously.
“People may want to trade up. When people are feeling good, that trade from Walmart to Target happens quite a bit,” Mushkin said.
He expects Home Depot (HD), Lowe’s (LOW), Best Buy (BBY) and Target (TGT) to benefit from customers trading up to more expensive goods.
The February sales numbers should also keep at bay the fears about an overheating economy.
Some experts including Larry Summers have grown worried that the reopening of the economy, coupled with more government stimulus, could lead to spikes in consumer price inflation and force the Federal Reserve to raise interest rates sooner than hoped. Treasury Secretary Janet Yellen has said she isn’t concerned about a temporary move in prices.