February retail sales dip doesn’t include grocery stores

Grocery store sales improved slightly in February amid an overall decrease for the U.S. retail marketplace.

February retail and foodservice sales came in at $697.88 billion (seasonally adjusted), down 0.4% from $700.68 billion in January and up 5.4% from February 2022, the U.S. Census Bureau reported in advance estimates on Wednesday.

Retail trade sales for February—excluding motor vehicles, parts stores, gas stations and repair shops—dipped 0.1% month to month to $605.14 billion and rose 4% year over year.

February’s retail sales decline followed a 3.2% monthly gain in January and a 1.1% sequential decrease in December (in updated Census Bureau figures), although both months saw annual upticks of 7.7% and 5.9%, respectively. Retail trade sales grew 2.9% for January and fell 1.3% for December on a monthly basis yet advanced 5.5% and 4.8%, respectively, year over year.

“Today’s retail sales report reflects a pullback in consumer spending after a spike in January,” Claire Tassin, retail and e-commerce analyst at data intelligence firm Morning Consult, said in an email. “The longer-term trend shows that retail growth is bolstered by inflation, and shoppers are pulling back on discretionary spending, with the strongest impacts on department stores and home furnishings retailers. This is consistent with what we heard in retailers’ earnings reports in recent weeks, as essentials take priority in consumers’ budgets.”

Though the January-to-February period typically shows a modest retail sales increase, the downturn in February wasn’t surprising because of still-elevated inflation and declined foot traffic, according to Naveen Jaggi, president of retail advisory services at commercial real estate firm Jones Lang LaSalle (JLL).

“While sales were mostly down from February 2023, we did see an improvement year over year as consumers focused more on experiences: restaurants, airlines and accommodations,” Jaggi explained. “Notably, food services and drinking places were up 15.3%, general merchandise stores were up 10.5%, and health and personal care stores were up 8.0% from last year.”

Grocery store sales edged up 0.6% in February to $72.54 billion (seasonally adjusted) from $72.14 billion in January, when month-to-month results declined 0.6% in updated estimates, the Census Bureau said. On a 12-month basis, February grocery retail sales climbed 5.8%, compared with an annual gain of 6.6% for January.

Sales at all food and beverage stores for February were in line with the grocery retail performance, up 0.5% sequentially to $81.01 billion (seasonally adjusted) and growing 5.5% year over year. January food and beverage store sales rose 0.1% on a monthly basis and 6.2% annually, the Census Bureau reported.

Food-at-home price inflation eased up again in February, and Morning Call food and beverage analyst Emily Moquin noted that consumer concerns about grocery costs are leveling off. In her latest Smart Appetite trends tracker, she spotlighted Morning Call research showing the share of shoppers “very concerned” about pricing across product categories as relatively stable during the last three months.

“For many categories, concerns are down from mid-2022 highs and consistent with levels seen in February 2022—with the exception of dairy and meat, which are higher and lower, respectively,” Moquin stated. Of 2,200 U.S. adults polled, 26% said they spent more on groceries versus a month ago, while 12% reported spending less.

Source: Morning Consult, "Smart Appetite" food/beverage trends tracker.

On Wednesday, National Retail Federation (NRF) reported February retail sales growth of 0.5% month to month (seasonally adjusted) and 6.5% year over year (unadjusted), compared with a 1.5% monthly uptick and 4.8% annual increase in January.

NRF’s estimate focuses on core retail, excluding automobile dealers, gas stations and restaurants. The retail trade organization noted that its figures were up 6% unadjusted annually on a three-month moving average as of February.

“Sales growth has slowed in recent months, but consumers’ economic health still looks good,” NRF Chief Economist Jack Kleinhenz said in a statement. “February is typically the slowest month of the year, so monthly fluctuations are expected. Sales are higher than last year, and that’s due in large part to the strong labor market, which means more income and spending. We are seeing a decent trend for retail sales growth built on the upward revisions to December and January sales. Nonetheless, seasonal adjustment factors the government is applying to the monthly data to account for irregular post-pandemic spending patterns make it difficult to accurately measure the strength of the consumer.”

February sales rose on a monthly basis in five of nine retail categories tracked by NRF and decreased in four segments: Apparel and accessories, sporting goods stores, building materials and garden supply stores, and furniture and home furnishings stores. Just one category—electronics and appliance stores—turned in lower sales year over year.

Grocery and beverage stores posted sales growth of 0.5% month to month seasonally adjusted in February and 5.5% unadjusted over 12 months, NRF reported. Among other retail categories in the food, drug and mass channel, February sales edged up 0.9% month over month seasonally adjusted and 8% unadjusted year over year for health and personal care stores (including drugstores), and general merchandise stores saw sales rise 0.5% month over month seasonally adjusted and 10.7% unadjusted year over year.

“Retail sales softened in February, with spending on categories like durables and food services coming down after strong increases the previous month,” commented Kayla Bruun, economic analyst at Morning Consult. “Despite the weaker top-line reading, the report also contained signs that consumer spending overall is still decently strong. The retail control group, which is an indicator of goods spending for PCE [personal consumption expenditures] later this month, registered a surprise increase, and Morning Consult’s spending data—which covers a broader set of categories including services—showed a month-over-month increase in overall outlays for February.”