Retail sales in the US grew at their fastest pace in seven months during February, suggesting US consumers were in a relatively strong position before the conflict in Iran started. Sales had dropped in January, but the February result showed that consumer spending in the first quarter of 2026 may not be as originally feared. Looking ahead, however, consumer demand could come under pressure with inflation expected to increase amid higher energy prices. Meanwhile, the US labour market showed more signs of being on shaky footing, which could also weigh on US households’ spending decisions.

• US retail sales rose by 0.6% in February over the previous month. This was more than the 0.5% increase economists had expected, according to a Bloomberg survey. Retail sales had fallen 0.1% in January after stalling in December.
• February’s increase was relatively broad-based across industries. Strong contributions came from an increase in sales at department stores, motor vehicles and parts dealers, and gasoline stations.
• Conversely, sales declined at food and beverage retailers and at furniture stores.
• Looking at the US labour market, ADP reported that private businesses in the US added 62,000 jobs in March, which was above expectations but down from the 66,000 job additions in February. Private business hiring dropped off in 2025.
• A separate labour market report from Tuesday showed that job openings in the US dropped to 6.88 million in February from 7.24 million in January.

Hiring activity in the US has slowed, which could have an impact on consumer spending. Consumer spending has a significant impact on the US economy, so a pullback could weaken economic growth. Yet, sales picked up in February, suggesting consumers remain relatively resilient. However, spending could be hindered by higher prices in the coming months in response to the conflict in the Middle East.

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