NEW YORK — Consumers increased their spending in February, particularly on cars and clothing, after pulling back earlier in the year due to severe winter storms.
Retail sales rose a more than expected 0.6% in February, from a 0.1% decline in January, the Commerce Department said Wednesday.
But there is concern that the war in Iran, which is pushing up oil prices and whose impact was not reflected in retail sales data, could hurt spending at a time when Americans are already being squeezed by years of high prices.
Gas averaged $4 a gallon on Tuesday for the first time since 2022 and jumped another 4 cents overnight.
The national average for a gallon of regular gasoline reached $4.06 Wednesday. That was a dollar more than a gallon before the war.
Dealer sales of autos and auto parts rose 1.2% in February. Excluding that sector, retail sales rose 0.4%
Business at clothing and accessory stores rose 2%, while sales at electronics and appliance stores rose 0.5%. Sales at online retailers rose 0.7%. And businesses in health and personal care stores were up 2.3%
This figure provides a partial view of consumer spending, and excludes items such as travel and hotel stays. But one service group – restaurants – registered an increase of 0.4%.
“This was a solid report,” Ksenia Bushmeneva, chief economist at TD Bank Group, wrote in a report published on Wednesday.
He noted that higher gas prices at the pump may have boosted overall sales in March since the government’s retail sales figures are not adjusted for inflation. But he said “real money can be problematic as consumers seek to reduce high fuel costs by cutting back on the things they love, with travel and leisure spending as areas that can be cut back.”
The Iran war began on February 28 and has closed the Strait of Hormuz, cutting off a fifth of the world’s oil supply. The price of a barrel of Brent crude, the international standard, is up more than 45% since the war began. The price of diesel fuel has risen faster than gasoline, driving up transportation costs for companies. Economists are expecting a slowdown in inflation, possibly as soon as this month.
Economists believed that an unusually large jump in tax refunds would start spending at the beginning of the year. But rising gas prices will cost that money.
“Real income growth from higher gas prices has been significantly reduced, disproportionately hurting low-income households, while the flow of tax refunds has been disproportionately widening,” Samuel Tombs, chief economist at Pantheon Economics, wrote in a recent report. “Furthermore, refunds will decrease towards the end of April, providing little protection if higher prices continue.”
Higher gas prices appear poised to reduce real household incomes by about $15 billion a month, he said.
Patrick De Haan, an analyst at GasBuddy, which tracks fuel prices, noted that the way to measure the impact of gas prices is how much gas costs make for a consumer’s income. He said that gas prices are approaching 3% of household income.
“When that gets to 4, 4 1/2, 5%, that’s when people really start to cut back on their discretionary purchases,” he said.
Some retailers are already warning about the impact on consumers if gas prices rise.
Daniel Erver, CEO of Hennes & Mauritz, said last week that the Swedish fast fashion chain expects energy prices to have a “significant impact on consumer behavior” if the war drags on.
And Darren Rebelez, CEO of the convenience store Casey’s General Stores, told investors last month that there is likely to be a large spending opportunity unless gas approaches $5 per gallon.
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