“Last month was the eye of a retail spending hurricane,” Robert Frick, corporate economist at Navy Federal Credit Union, said in an email. “Freezing weather across much of the U.S. depressed retail spending in February, but March has the benefit of the biggest COVID-19 stimulus package yet, plus better weather.”
Economists said they expect retail spending to rebound in the coming months, boosted by rising vaccination rates and a new round of stimulus checks. Consumers, they said, are likely to spend more freely on travel, dining, entertainment and clothing as the pandemic eases.
The retail industry has had a tumultuous year, with many brands still struggling to make up for temporary store closures early in the pandemic. And though big-box chains like Target, Walmart and Home Depot have brought in record profits in recent months, many smaller retailers continue to grapple with depressed demand.
Analysts say February’s retail sales were set back by the winter storms that blanketed much of the South, knocking out power amid deadly low temperatures for millions of households in Texas, Mississippi, Tennessee, North Carolina, Oklahoma, Louisiana, Kentucky, West Virginia and Arkansas. Consumers were stuck indoors, and delivery services were delayed by the weather.
The Internal Revenue Service also delayed when the agency would start accepting tax returns, which pushed back the release of refunds for consumers. Nearly 7 million tax filers are in limbo this tax season, waiting for their returns to be processed, because of the agency’s struggle to keep up with stimulus check distribution and changes to the tax code from the coronavirus relief packages.
Retail spending in February fell in just about every category, with the exception of gas stations, where sales rose 3.6 percent from a month earlier. Spending at food and beverage stores remained flat, while clothing sales slid nearly 2.8 percent from the previous month. Some of the largest declines were at general merchandise stores and online retailers, where sales dropped nearly 5.4 percent, and for motor vehicle and parts dealers, which fell 4.2 percent.
But economists said the slowdown is probably a temporary blip, just a speed bump on the country’s path to economic recovery. Retail sales soared 7.6 percent in January, when consumers spent $579 billion, driven in part by stimulus checks that went out in late December.
“After January’s strong showing, we expected some payback in the form of lower figures in February by comparison,” National Retail Federation chief economist Jack Kleinhenz said in a release. “Despite that, it’s hard to see this as a setback when you consider how large the year-over-year gains are and that sales are well above pre-pandemic levels.”
Economists said they expect that momentum to return this month.
“The consumer is back with lots of support, despite a setback in February,” Diane Swonk, chief economist at Grant Thronton, wrote in a research note. “Revisions to January suggest that more of the initial stimulus was spent than we initially thought. Another round of stimulus checks looks like it is helping to spread spending from goods back into services — notably travel — in March.”