The latest U.S. retail data has halted the decline, but the market is already focusing on March amid the ongoing conflict.

The figures released by the U.S. Department of Commerce on Wednesday showed that U.S. February retail sales rebounded 0.6% month over month after falling slightly in January. This suggests that, before the outbreak of the fighting in the Middle East, against the backdrop of an AI-related threat to the job market and weak consumer confidence, Americans increased spending after a sluggish start to the year.

(Source: U.S. Census Bureau)

The data released on Wednesday were also slightly higher than the unanimous forecasts by economists compiled by FactSet (0.4%). Of the 13 retail categories, 10 recorded growth, including a 1.2% rise in motor vehicle sales—the largest increase since July last year—partly due to the severe cold in January suppressing demand.

In addition, the so-called “control group” sales data (used to calculate goods spending in GDP) also rose 0.5% month over month in February, the largest increase since October last year. This indicator excludes the food services, auto dealership, building materials store, and gas station categories.

The prior January retail sales data were revised to a month-over-month decline of 0.1%, slightly higher than the initially reported 0.2% drop.

Part of what sparked a rebound in retailers’ business was February tax refunds. An analysis by the Bank of America Institute of internal-account data showed that tax refunds helped boost discretionary spending among low-income consumers in February.

Because two-thirds of U.S. GDP comes from personal consumption expenditures by households, economists are paying particular attention to the retail data. In recent years, retail data has been linked more closely to the health of the U.S. labor market than to people’s subjective perceptions. The U.S. Bureau of Labor Statistics will release the March nonfarm employment report this Friday. After a sharp drop in the previous month, the market is expecting employment data to show a modest rebound.

Especially worth noting is that most of the data released this week has not been able to reflect the full extent of the impact of the fighting in the Middle East.

As U.S. gasoline prices this week climbed to a new high since 2022 at $4 per gallon, this war could both raise inflation and weaken consumption and economic growth, while also creating greater risks as the conflict continues. U.S. President Trump has repeatedly hinted that he will withdraw from this war in the short term, and he will deliver a nationwide address on Wednesday evening local time.

Meanwhile, as U.S. stock markets also “shrink” in March along with the conflict, the affluent segment that supports the U.S. consumer market may also reduce spending.

Vivian Chen, an economist for Nationwide Financial Markets, interpreted for the media that the February retail sales report was released before the escalation of the recent Middle East conflict, and had not yet reflected any drag that could be caused by higher energy prices, volatility in financial markets, or heightened geopolitical uncertainty.

The latest consumer survey from the University of Michigan shows that consumer confidence fell by 6% this month, to the lowest level since December last year, and that confidence levels worsened across all income groups, including the most affluent.

（Source: Caixin Global / 财联社）