The retail data arrived the same day as a separate Labor Department report showing employers unexpectedly cut 92,000 jobs in February and the unemployment rate rose to 4.4%, compounding concerns about the consumer outlook heading into spring.
American consumers pulled back their spending in January, with retail sales falling 0.2% from December, the Commerce Department reported Friday in a release delayed 43 days by the government shutdown. The January figure came in below economists’ expectations for a flat reading, following a flat December and extending a softening trend in consumer demand that began in late 2025.
On a year-over-year basis, retail and food service sales rose 3.2% above January 2025 levels, according to federal data, showing that the longer-run demand picture has held up even as recent monthly readings have weakened.
Sales at motor vehicle and auto parts dealerships were the primary drag on the January reading. Gas stations also recorded a decline, reflecting lower pump prices during the month — a reversal that has since unwound. The national average for a gallon of unleaded gasoline stood at $3.32 on Friday, up from $2.98 a week earlier, according to AAA, as the conflict in the Middle East has pushed prices higher.
Stripped of gas and auto sales, retail spending rose 0.3% in January. The control group measure — which excludes autos, gas, building materials, and restaurant meals and feeds into calculations of economic growth — also rose 0.3%.
Online retailers posted a 1.9% sales gain. Economists cited severe winter weather across much of the country as an additional drag on in-store shopping, keeping shoppers out of physical stores through much of January. Health and personal health stores recorded a 3% decline from December; clothing stores fell 1.7%. Consumer electronics and appliance retailers also registered declines. Home furnishings and building materials saw gains.
“One big caveat will be how gas prices evolve in the wake of the conflict in Iran with households sensitive to the price at the pump,” Tim Quinlan, an economist at Wells Fargo, wrote Friday. “Consumers are fairly sensitive to gas prices, and the average price of a gallon of gasoline is already up by 25 cents in the first week of March compared to the average registered in February on the national level.”
Quinlan wrote that the January spending picture was stronger than the headline figure suggested, but flagged that higher gas prices would translate to “lower real, or inflation-adjusted consumption.” He said he expects higher tax refunds to support spending in March, but identified rising pump prices as the primary risk to that outlook.
A separate Labor Department report released Friday showed employers cut 92,000 jobs in February — far below the 60,000 new positions economists had expected and a sharp deterioration from the 126,000 jobs added in January. The unemployment rate rose to 4.4%.
Major retailers reported divergent results in recent weeks. Walmart Inc. delivered a strong quarter, drawing shoppers across income levels with lower prices and faster deliveries. Target reported a quarterly decline in both profits and sales during the critical holiday period, citing difficulties with its own merchandising and a consumer focused increasingly on essentials. Home Depot’s fourth-quarter results topped Wall Street expectations, though ongoing caution from homeowners in a weak housing market tempered the retailer’s overall performance.
Retailers are also navigating a shifting tariff landscape. The Supreme Court struck down the largest of President Donald Trump’s tariffs, though Trump is moving to replace them with new measures. That uncertainty has made retailers cautious about hiring decisions and merchandise orders.