Americans are now beginning to spend less on purchases

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An unexpected spending spree by U.S. shoppers seem to have calmed down.

Retail spending declined 0.4% in February compared to January, the Commerce Department said on Wednesday. That’s after a surprise start-of-the-year shopping spree that contradicted the Federal Reserve’s goal of cooling down the economy to fight high prices.

People spent about 2% less on cars and parts, and 2.2% less at restaurants and bars, the latest report on retail sales showed. People bought less furniture, fewer clothes as well as home-improvement and gardening supplies. Spending at department stores dipped 4%.
Inflation has been moderating since peaking last summer, but consumer prices in February were still 6% higher than a year ago, data showed this week. People have been shifting more of their budgets toward activities and outings, where prices continue to rise.

In February, people spent 0.6% more at grocery stores and 1.6% more on online shopping. And overall, retail spending remained 5.4% higher than it was a year before, in February 2022.

“It’s very clear that consumers were resilient throughout last year, were able to spend at a healthy clip and so far have kicked off this year in a similar way,” said Michelle Meyer, North America chief economist at the Mastercard Economics Institute.
The new report of a cool-off in retail sales may be good news for the Fed, which is weighing mixed messages from the economy.

The central bank had been expected to continue raising interest rates at its meeting next week, but the recent collapse of two tech-focused banks could alter the Fed’s thinking as policymakers shift their focus to stabilizing the banking system.