New York — Shoppers increased their spending in February, especially on cars and clothes, after declining at the beginning of the year due to severe winter storms.
The Commerce Department said Wednesday that retail sales rose a better-than-expected 0.6% in February, from a revised 0.1% decline in January.
But there is concern that war with Iran will cause gasoline prices to rise to rise The impact, not reflected in retail sales data, could hamper spending at a time when Americans are already suffering from the pressures of years of high inflation.
The price of gas surpassed an average of $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 was $4.06 on Wednesday. That was $1 more per gallon before the war.
Sales at auto and auto parts dealerships rose 1.2% in February. Excluding this 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%. Business at health and personal care stores rose 2.3%
The snapshot provides only a partial look at consumer spending and does not include things like travel and hotel stays. But the only service category – restaurants – recorded an increase of 0.4%.
“This was a strong report,” Ksenia Pushmeneva, an economist at TD Bank Group, wrote in a report published on Wednesday.
He noted that higher gas prices at pumping stations would likely lift overall sales in March, as government retail sales numbers have not been adjusted for inflation. But he said: “Real spending may take a hit as consumers look to offset higher fuel costs by cutting discretionary items of spending, with travel and leisure spending likely to be cut.”
the Iran war It began on February 28 and 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, has risen by more than 45% since the beginning of the war. The cost of diesel fuel has risen faster than gasoline, resulting in higher transportation costs for businesses. Economists expect a similar rise in inflation, perhaps as soon as this month.
Economists had believed that an unusually large jump in tax refunds would jumpstart spending at the beginning of the year. But rising gas prices will take a bite out of that money.
“The hit to real income from higher gas prices is particularly regressive, hitting low-income households disproportionately, while the lift from tax refunds is more evenly spread,” Samuel Toombs, chief economist at Pantheon Economics, wrote in a recent report. “Furthermore, refunds will slow considerably by late April, offering little protection if high prices persist.”
He said that the rise in gas prices appears to reduce the real income of families by about $15 billion per month.
The way to measure the impact of gas prices is how much gas expenses account for a shopper’s income, noted Patrick De Haan, an analyst at GasBuddy, which tracks fuel prices. He said that gas prices are close to 3% of middle-income families.
“When that gets to about 4, 4 1/2, 5%, that’s when people actually start to cut back on some of their discretionary purchases,” he said.
Some retailers are already warning of the consumer impact if gas prices rise.
Daniel Erver, CEO of Hennes & Moritz, last week said that the Swedish fast fashion chain expects energy prices to have a “significant impact on consumer behavior” if the war is prolonged.
Darren Rebelles, CEO of convenience store chain Casey’s General Stores, told investors last month that a significant decline in customer spending was unlikely unless gas approached $5 per gallon.