By Lucia Mutikani
WASHINGTON (Reuters) -U.S. retail sales rebounded marginally in February as consumers pulled back on discretionary spending, reinforcing the growing uncertainty over the economy against the backdrop of tariffs and mass firings of federal government workers.
Nonetheless, the report from the Commerce Department on Monday suggested that the economy continued to grow in the first quarter, though at a moderate pace. It sketched a picture of a cautious consumer, with sales at restaurants and bars declining.
"This report should alleviate concerns that the economy already is shrinking," said Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics. "But the risk of much weaker growth, as consumers seek to rebuild a savings buffer in response to concerns about job security, now looks elevated."
Retail sales rose 0.2% last month after a downwardly revised 1.2% decline in January, the Commerce Department's Census Bureau said. Economists polled by Reuters had forecast retail sales, which are mostly goods and are not adjusted for inflation, advancing 0.6% after a previously reported 0.9% drop in January. That decline followed hefty gains in the fourth quarter and winter storms in many parts of the country in January as well as wildfires in California.
Sales increased 3.1% year-on-year in February. Monthly sales were lifted by a 2.4% jump in receipts from online stores. Sales at health and personal care stores jumped 1.7%.
Sales at building material and garden equipment suppliers gained 0.2%. But receipts at auto dealerships fell 0.4% after dropping 3.7% in January. Furniture store sales were unchanged while receipts at clothing stores fell 0.6% and those at electronic retailers dropped 0.3%.
Receipts at food services and drinking places, the only services component in the report, declined 1.5% after being unchanged in January. Economists view dining out as a key indicator of household finances. Lower gasoline prices helped to lower the value of sales at service stations by 1.0%.
With consumer sentiment sinking to a near 2-1/2-year low in March, sales could struggle in the months ahead.
President Donald Trump's raft of tariffs, which have unleashed a trade war, has ignited worries about inflation as well as job and income losses, developments that could undercut consumer spending. Mass layoffs of public workers as part of an unprecedented campaign by the Trump administration to shrink the federal government are also seen hurting spending.
Retailers, including Kohl's, Macy's, Walmart and Target have tempered sales expectations amid mounting inflation and recession fears related to the tariffs.