Retail Sales

Easing Health Restrictions Support Retail
But Surging Gas Prices a Headwind

Retail sales mixed in February. Consumer spending increased a modest 0.3 percent last month, although much of the gain was driven by climbing fuel prices. Excluding energy costs, core retail sales retreated 0.4 percent in February, as widespread inflation eroded some consumption. Spending was nevertheless 15.8 percent above the same level last year, indicative of an overall more active consumer base. In a potential benefit to physical properties, the largest drag last month came from online sales, which fell 3.7 percent. As the omicron variant dissipated, more Americans were able to shift their behavior and visit tangible retail locations.

Restaurants and bars show renewed performance. After being hamstrung by the winter surge in COVID-19 cases, more patrons returned to eating and drinking places in February, lifting sales 2.5 percent over the month. Year-over-year, foot traffic to dining establishments has climbed 19 percent nationwide, leading to a 33 percent annual growth rate in sales — the second highest jump among the major retail categories. California and New York posted significant gains, expanding 49 percent and 51 percent, respectively. These areas recently lifted restrictions, which improves general comfort and will allow more consumers to visit these establishments. The outlook for bars and restaurants is bright as the weather improves, though inflation and labor costs could become notable headwinds.