WASHINGTON: US retail sales accelerated more than expected in February, a delayed government report showed Wednesday, but analysts warn that this rebound stands on fragile foundations while price shocks loom from war in the Middle East.
Sales jumped by 0.6 percent overall on a monthly basis to $738.4 billion, a touch higher than the 0.5 percent rise that analysts expected, according to Commerce Department data.
The uptick was driven by a bounceback in auto and gasoline sales, and comes after a 0.1 percent decline in January.
Compared with February 2025, retail sales were up 3.7 percent.
This “confirmed that US consumers are still spending, with little evidence of retrenchment so far,” said EY-Parthenon senior economist Lydia Boussour.
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But the February report, which was delayed by a lengthy government shutdown last year, has yet to capture the impact of the US-Israeli war on Iran that started February 28 and has plunged the Middle East into chaos.
Tehran’s retaliation has sharply limited access to the Strait of Hormuz, a critical shipping route for global energy supplies.
This has caused oil prices worldwide to rocket, and costs at US gasoline pumps have also surged.
Higher prices, in turn, are fueling worries of more widespread inflation and a hit to consumer demand and growth.
The strength in February sales however, “masks a fragile and uneven underlying foundation ahead of escalating tensions in the Middle East,” said Boussour.
Job market prospects are weakening while household balance sheets are showing signs of strain, she added in a note.
“Now, rising gasoline prices are eroding disposable income and putting further pressure on consumers’ ability to spend,” she said.
Average US gasoline prices topped $4 a gallon for the first time in four years this week, passing a threshold likely to have a big psychological impact on consumers.
For now, excluding sales for motor vehicles and at gasoline stations, month-on-month sales were up 0.4 percent in February.
But grocery store sales slipped, as did those at furniture stores.
A separate report Wednesday by payroll firm ADP showed that US private sector employment beat expectations in March, although hiring remained concentrated in certain industries like health care.
The private sector added 62,000 jobs last month, ADP said.
“The pre-war economy was robust,” said Navy Federal Credit Union chief economist Heather Long. “ADP data shows that even small firms were hiring again after a sluggish 2025.”
But she warned that average gas prices exceeding $4 per gallon changes the story.
“It’s shaping up to be a slow-speed spring as the economy faces this massive shock,” Long said.
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