Retail sales rose modestly last month as Americans continued to worry about inflation and rising food and gas costs.
February retail sales were up 0.3 percent from January, the Census Bureau reported Wednesday. But the most surprising figure was revised January sales, which increased to 4.9 percent from 3.8. And even though the rate of increase slowed in the last month, 2022 outpaces the year prior so far.
The slowdown in retail sales growth from January shows Americans are making tough budgetary decisions in response to the surge inflation, which hit another historic high last month. These spending shifts are painting an unlikely picture that the gains seen in January will repeat anytime soon. And some experts think consumers may need to brace for further impact depending on the trajectory of Russia’s war with Ukraine and the COVID surge in Asia.
“Higher energy prices and higher inflation, in general, are squeezing household budgets, and will be a factor going forward,” said Steven Ricchiuto, chief economist at Mizuho Securities USA.
In January, because of the most recent U.S. COVID-19 wave, many people were stuck at home, still replete with savings from stimulus checks. This led consumers to spend more online, which significantly contributed to the bump in the revised figure. January nonstore retailer sales, which includes online businesses, increased 20 percent from December.
“Consumers were benefiting a lot from stimulus. And certainly benefiting from the relaxation of the COVID-related restraints on the economy,” said Ricchiuto. “But they are also facing income concerns going forward.”
When the Omicron wave abated and places like New York lifted mask mandates last month, people returned to restaurants and bars, bought cars and did in-store shopping. Food services and drinking places, for example, saw a 2.5 percent uptick in February from the previous month and a 33 percent jump year-over-year.
But February wasn’t all champagne wishes and caviar dreams.
Last month, consumers felt rising grocery costs more acutely. Sales were down by 0.8 percent from January. Experts say that people are cutting corners wherever they can as they shop for food. “You know, the old example of choosing hamburger over steak,” said Russell Price, Senior Economist of Ameriprise Financial.
Gas sales, in contrast, were up 5.3 percent from January and 36.4 percent from last year. Retail sales don't adjust for inflation, and this means consumers are paying more for the same amount of gas.
High fuel costs were the last straw for Danielle Cerulli, 29, of Grand Blanc, Michigan. For the past nine months, the registered nurse was driving 68 miles one way to her hospital job in Detroit. Earlier this month, she made the decision to transition to part-time. She credits higher gas costs for her Subaru Crosstrek, coupled with the commute’s toll on her mental health, as major factors in that decision.
“Once it hit $4, it was game over,” said Cerulli, who tightened up her spending in other ways too. “I'm generally pretty wise with my money but I'm trying not to go to Target as much or get a coffee. It's unfortunate because it's the little things that I enjoy.”
While consumers think higher prices are enriching gas retailers, the opposite is true, according to Bart Fletcher, President of Petroleum & Convenience Marketers of Alabama. He said that rising gas prices are making interactions with customers tense. “They say, ‘they must be making hand over fist,’” he said. “When in reality, it's exactly the opposite.”
He explained that his constituents are paying more for fuel wholesale than what they can sell it for.
And now with a volatile geopolitical situation, rising interest rates and recent COVID-19 lockdowns in China, experts are unsure what the remainder of 2022 will bring. It could be more supply chain woes and individuals cutting discretionary spending, but it could also finally be a time for Americans to take long-postponed vacations, go to concerts and enjoy other pre-pandemic activities.
“I think even despite the inflation backdrop, people are going to really want to enjoy themselves,” said Price.