February Retail Sales - Healthy (For Now) Despite Record Gas Prices

February retail sales up 17.6% (nominal) and 9.7% (real) year-over-year.  Primary drivers of the year-over-year increase include spending on gasoline (+36.4%), restaurant dining (+33.0%) and apparel (+30.6%).  Despite sustained strength in real retail sales growth, heightened inflationary pressures exacerbated by the Russia/Ukraine conflict are posing a threat to consumer demand and therefore economic growth.  In an effort to tamp down inflation, the Federal reserve is set to begin a cycle of rate increases this afternoon.  The central bank will need to proceed cautiously to avoid adding uncertainty to an already uncertain time as it implements policies that will combat mounting price pressures.

February retail sales up 0.3% month-over-month (-0.5% adjusted for inflation).  The overall value of retail purchases increased 0.3% in February after an upwardly revised 4.9% jump in January.  February’s outcome was supported by a 5.3% jump in spending on gasoline – excluding gas stations, retail spending fell 0.2% month over month.  In a nutshell, today’s report suggests only a modest change in consumer spending trends against a backdrop of elevated inflation levels.  The war in Ukraine has caused commodities prices to skyrocket, adding to cost pressures and driving gasoline prices to record highs.